Muni Bonds Look Cheapest Since March After Rough Week of Returns

US state and local government debt hit its cheapest level since the spring, after inflation fears caused municipal bonds to see their worst week of returns since April 2025.

The 10-year AAA benchmark offered almost 71% of the yield on similar Treasuries as of Friday, the most since March, according to data compiled by Bloomberg. The so-called muni-Treasury ratio is a key gauge of relative value in the market.

Strong demand for municipal bonds had caused the securities to get expensive in recent months. Then came last week’s selloff, which followed US Treasuries as traders boosted bets that the Federal Reserve could raise interest rates soon.

Kim Olsan, senior portfolio manager at NewSquare Capital, said last week’s market selloff opened up a buying opportunity for investors and anticipates that the debt may further cheapen in certain tranches on the yield curve.

Munis rallied on Monday, with benchmark yields dropping as much as four basis points as of 12 p.m. in New York.