For munis, will today's yield drive tomorrow's return?

Munis are presenting an attractive income opportunity after a brutal third quarter. Yields on the Bloomberg AAA Municipal Curve now exceed 4% for 10-year maturities and 5% for 30-year bonds. This translates to taxable-equivalent yields over 8% for high-bracket investors, levels not seen historically.

The selloff was largely driven by technical factors like tax-loss harvesting and increased issuance. This retail-heavy market, which cannot be easily shorted, amplified price movements. While volatility may continue, elevated yields have historically signaled stronger future returns.