Municipal Quarterly Review 1Q 2026

Municipal bonds faced a difficult first quarter as rising Treasury yields, inflation worries, and heavy new issuance pushed prices lower. March was especially weak, but strong fund inflows and resilient demand helped absorb supply and may create a more attractive entry point for investors now. Valuations have become more appealing versus Treasuries, while the curve remains steep enough to reward selective positioning across maturities.

Credit fundamentals remain broadly supportive, with healthy reserves and a strong economy helping issuers manage near-term pressure. Even so, headline volatility is likely to persist, and careful security selection will matter as spreads are closer to fair value in many areas. For investors seeking tax-efficient income, munis still offer compelling long-term potential despite the recent setback.