Munis performance in November has been ‘flattish,’ PM says

Muni yields were unchanged Tuesday, continuing the theme of relative steadiness over the last 10-plus trading sessions. U.S. Treasuries were firmer and equities ended up.

Current intermediate and long-end yields remain “largely” exposed to reversals in fund demand, specifically exchange-traded funds, said Matt Fabian, president at Municipal Market Analytics.

“The prospect of a hypothetical return to Liberation Day style illiquidity via ETF liquidations continues to grow with record ETF asset gathering; municipals are structurally more prone to their behavior: a good reason for participants to carry more cash and spread and better manage expectations, going forward,” he said. “Still, any correction now does not need to go as far as all that.”

The two-year muni-UST ratio Tuesday was at 71%, the five-year at 68%, the 10-year at 69% and the 30-year at 89%, according to Municipal Market Data’s 3 p.m. EDT read. ICE Data Services had the two-year at 70%, the five-year at 67%, the 10-year at 68% and the 30-year at 88% at a 4 p.m. read.

Supply drops below $2 billion this week due to the holiday-shortened week, though issuance in the first week of December should be sizable, with several large deals — including at least three billion-dollar-plus deals — already on the calendar.

“Dealer inventories have grown heavier throughout [November], which could put pressure on the market if supply reverts to its weekly average of over $10 billion,” said Chris Brigati, CIO and managing director of SWBC, and Ryan Riffe, SVP of capital markets at the firm.

“In such a scenario, choppy trading conditions are likely to persist into yearend, creating potential buying opportunities as desks look to reduce risk and unwind aged positions,” they said.

Heading into 2026, strategists are “constructive” on the muni market, said James Welch, head of municipals at Principal Asset Management.

“The key driver is that the tax-risk concerns that weighed on the sector earlier this year have now been fully removed,” he said.

Munis had “grossly underperformed” other U.S. fixed-income options until the early July signing of the One Big Beautiful Bill Act on July 4, but performance has improved since the threat to tax exemption has passed, Welch said.

“November has been a flattish month from a performance perspective, although December appears to have a positive tailwind given investor-friendly supply/demand technicals,” said Daryl Clements, a municipal portfolio manager at AllianceBernstein.

Net supply next month is expected to be negative $3 billion, meaning there will be $3 billion more in “organic” demand than new-issue volume, he said.

Tax-exempt issuance for December is expected to total $30 billion, with $33 billion in demand coming from bond coupon payments, maturities and calls, Clements said, citing J.P. Morgan data.

From a performance perspective, the moderated supply should be a positive tailwind, Clements said.

Over the past 25 years, December has generally been a “favorable month” for investors with munis posting an average return of 0.54%, he said.

During this time, returns for the month have ranged from negative 1.94% to positive 2.48%, with December recording losses only six times, Clements said.

“We believe this technical backdrop continues to provide a compelling opportunity for a barbell maturity structure — investors can not only take advantage of attractive relative valuations on both the front- and long-end of the yield curve but also benefit from strong absolute performance from long-dated bonds if yields fall,” he said. “And with the likelihood bonds rally in December due to strong technicals, long-maturity bonds are likely to continue to outperform short-maturity bonds.”

In 2026, Welch expects both absolute and relative outperformance because munis are “simply winning the income game.”

“The taxable-equivalent yields they offer remain superior to anything available in taxable U.S. fixed income,” he said. “And with supply likely to reach another record in 2026, those elevated, attractive yields are expected to persist.”

In the primary market Tuesday, Barclays priced for the Pennsylvania Housing Finance Agency (Aa1///) 254.88 million of non-AMT social single-family mortgage revenue bonds, with 5s of 4/2026 at 2.67%, 5s of 4/2030 at 2.85%, 5s of 10/2030 at 2.91%, 3.6s of 4/2035 at par, 3.65s of 10/2035 at par, 4.15s of 10/2040 at par, 4.6s of 10/2045 at par, 4.9s of 10/2050 at par and 6.25s of 10/2055 at 3.57%, callable 10/1/2033.

AAA scales
MMD’s scale was unchanged: 2.52% in 2026 and 2.46% in 2027. The five-year was 2.41%, the 10-year was 2.75% and the 30-year was 4.16% at 3 p.m.

The ICE AAA yield curve was little changed: 2.48% (unch) in 2026 and 2.46% (unch) in 2027. The five-year was at 2.42% (unch), the 10-year was at 2.76% (unch) and the 30-year was at 4.11% (unch) at 4 p.m.

The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.51% in 2025 and 2.45% in 2026. The five-year was at 2.40%, the 10-year was at 2.75% and the 30-year yield was at 4.13% at 3 p.m.

Bloomberg BVAL was unchanged: 2.51% in 2025 and 2.46% in 2026. The five-year at 2.39%, the 10-year at 2.72% and the 30-year at 4.05% at 4 p.m.

Treasuries saw gains.

The two-year UST was yielding 3.462% (-4), the three-year was at 3.456% (-3), the five-year at 3.57% (-2), the 10-year at 4.007% (-2), the 20-year at 4.623% (-1) and the 30-year at 4.667% (flat) near the close.