Municipal Bond Snapshot June 2026

Key Takeaways:

• Municipals posted modest gains as strong investor demand more than offset another heavy month of supply.
• The back half of the yield curve continues to offer value, in line with its 10-year average.
• The summer reinvestment cycle and historically attractive tax-equivalent yields should be a tailwind for the market entering Q3.

MUNICIPAL BOND MARKET UPDATE

• Treasury yields finished mixed in June: front-end yields rose as the Fed signaled greater odds of a hike later this year, while long-end yields declined slightly on expectations that tighter policy would help contain inflation.
• Municipals outperformed Treasuries across the curve, most notably at the wings.
• Muni/Treasury ratios ended the month near their richest levels of the year, led by the short end. The 2-year ratio ended the month at 56% and the 10-year at 66%.
• Issuance topped $60 billion for the month, another heavy supply calendar that the market absorbed with relative ease.
• Mutual fund inflows stayed robust, keeping 2026 on pace for the second-highest year of inflows on record.
• The front half of the yield curve steepened, with 2s/10s pushing out to +60 bps, while the back-half flattened.
• The 10s/20s slope tightened to +83 bps – less attractive than earlier in the year, but still modestly steeper than its 10-year average.
• Credit spreads were largely stable and rating-category performance was tight, as elevated yields reduced any need to reach down in quality.
• Munis enter the summer with historically attractive tax-equivalent yields and favorable supply/demand dynamics, a backdrop that should be supportive of the muni market despite rich muni/Treasury ratios.