Municipal Bond Snapshot November 2025

Key Takeaways:

• Following the strong fall rally, municipals held steady in November, with year-to-date performance in the mid-single digits.
• A moderation in supply, combined with continued fund inflows, created a supportive backdrop.
• The muni curve was largely unchanged, with the back half remaining the steepest part, both in absolute terms and relative to historical averages.
• December should bring better technicals with reinvestment flows picking up and supply continuing to ease.

MUNICIPAL BOND MARKET UPDATE

• Treasury yields bull steepened amid shifting expectations around a December rate cut.
• Tax-exempt yields were little changed aside from a small uptick in the belly of the curve.
• New-issue volume came in around $40 billion, the lowest since February but still up 60% from last November when election uncertainty kept issuance light.
• Fund flows were positive with the majority going into ETFs, a trend we have seen all year.
• Relative value ratios cheapened modestly but remain historically tight, leaving valuations generally stable heading into year-end.
• The front part of the curve is still flat-to-inverted, with the low point at the five-year (2.41%) and only four basis points separating the one-year (2.50%) from the seven-year (2.54%).
• However, the back end remains historically steep with 10s15s at +53 bps and 10s20s at +112 bps.
• Credit spreads were largely unchanged with little performance difference among investment-grade rating categories.
• The election of a new mayor in New York City made headlines, but long-standing statutory controls and state oversight keep credit fundamentals largely in place.
• We continue to see the best relative value beyond 10 years, where yield and roll remain compelling.
• Looking ahead to 2026, munis provide tax-efficient income and benefit from fundamentals that are often outside the forces driving the equity and corporate credit markets, making them an effective hedge during periods of potential volatility.