Municipal Bond Snapshot March 2026

Key Takeaways:

• Municipals posted their weakest monthly performance in over two years, reversing gains from earlier in the year.
• Despite elevated volatility, the market continued to function, with robust new issuance creating attractive opportunities.
• The muni market has reset to healthier levels, with yields at six-month highs, improved relative value ratios, and a more normalized curve.

MUNICIPAL BOND MARKET UPDATE

• Treasury yields rose sharply in March amid geopolitical escalation and higher oil prices.
• Municipals had a challenging month, pressured by the broader sell-off and seasonal headwinds.
• Tax-exempt yields increased 30-60 basis points (bps) across the curve, led by the 10-year area.
• Supply was robust at $50 billion, the largest monthly figure on record, with concessions needed to attract demand.
• Fund flows turned negative late in the month but the impact seemed limited.
• The 10-year muni/Treasury ratio cheapened, ending the month at 72%.
• Front-end slopes steepened meaningfully, with 2s/10s pushing out to +70 bps.
• The back-end flattened with 10s/20s dropping to +100 bps; however, it remains over a standard deviation steep to its historical average.
• Credit spreads were little changed on the month with only slight compression in BBB and A-rated credits.
• New York City (Aa2/AA) had its outlook revised to negative by Moody’s and Fitch on out-year budget gaps, but by law the budget must ultimately be balanced.
• Muni yields have reset to levels rarely seen in the decade following the financial crisis.