Muni Market Update: Yield Spike

An illiquidity drought has swept through financial markets leading to spiking treasury and municipal yields. Yesterday’s announcement about a tariff pause may alleviate market conditions, but municipal yields are now at 14-year highs. The Bloomberg 10-year AAA rated benchmark ticked to 3.80% yesterday, which is over 6% taxable equivalent at the 37% bracket. The 10-year Treasury, for comparison, is 4.31%.

Historically, such market conditions are acute, short-lived, and offer great investment opportunities over the medium-to-long-term. A strength of the SMA (separately managed account) strategy we employ in client portfolios is it mostly avoids forced selling in this chaotic market unlike the fund/ETF universe. Massive selling activity – forced selling of fund and ETF investment vehicles – is in large part a cause of the irregular bond yields.

Alternatively, during the recent bond market turmoil we were actively bidding and buying yesterday and welcoming taxable equivalent yields of 5.00%-7.90% into investor portfolios. We believe such opportunities will remain for the coming days, but market conditions remain extremely volatile.

Please reach out to your Investment Specialist if you have any questions about your portfolio and current market conditions.