Spring Into Summer With Municipals - Municipal May Update

2025-06-25 08:52:00 ET

By Patrick Haskell & Sean Carney

Originally published on June 5, 2025

Market overview

Municipal bonds posted modestly negative performance in May, significantly outperforming comparable Treasuries. Interest rates rose materially as the market navigated tariff uncertainty, resilient economic data, hawkish Fed rhetoric, deficit concerns, and Moody’s downgrade of the U.S. sovereign credit rating. However, municipals displayed relative strength, continuing to recover from April’s selloff, as improved valuations spurred consistent demand. The S&P Municipal Bond Index returned -0.08%, bringing the year-to-date total return to -0.88%. The intermediate part of the yield curve, AA-rated credits, pre-refunded bonds, and the IDR/PCR and housing sectors performed best. ...

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