Municipal Fixed Income Monthly

Municipal bonds extended their run of positive returns in February, supported by strong demand, solid fundamentals, and manageable credit profiles across most states and cities. Yields fell across the curve and the steepening muni term structure now rewards investors willing to extend duration, even as front-end valuations remain tight.

Heavy new issuance has been met with robust inflows, particularly into investment grade and longer-duration strategies, underscoring confidence in munis’ income and diversification potential. At the same time, geopolitical tensions, tariff uncertainty, and AI-related growth concerns are adding volatility to rates markets and could challenge valuations.

In this environment, active management focused on security selection, curve positioning, and credit selectivity may be key to capturing opportunities while managing emerging risks heading into 2026.