For municipal bond investors, March’s 1.69% monthly drop
might feel like a punch in the gut. Sellers aren’t faring much better—rate
volatility dragged on all month, turning hedging into a guessing game rather
than a skill, leaving them just as irritated. Still, March’s shake-up has
pushed current ratios to levels that scream bargain across the #MuniBond
market, making it worth a closer peek.
March 2025’s muni returns now rank alongside March 2022 and
March 2020 as the three ugliest monthly losses in two decades. Remember March
2020 was the Covid Shutdown month which featured panicked selling.
More Supply:
New bond issuance has spiked—up 20% year-over-year this
month, according to Bloomberg’s numbers—while fewer bonds have matured or paid
interest, thus leaving investors short on cash to reinvest.
In March 2025, Bank of America/Merrill Lynch has already
their 2025 issuance projection to $580 from $520 billion.
Record Issuance Year 2024 - $508 billion per Bond Buyer
Previous Record Year 2016 - $445 billion
Previous Record Year 2010 - $433 billion (BABs program
peaked)
Less Demand:
$573 million flowed out of muni-bond funds in the week
ending Wednesday March 26, 2025, marking three straight weeks of withdrawals,
per LSEG Lipper data. Some of the selling pressure can be attributed to investors selling their MuniBonds to pay their April 15th tax bill.
20 year plus maturities see the strongest relative value to US Treasury Market
above 80% M/T is considered relatively cheap for earners in the highest income tax brackets
Muni-to-Treasury Ratios Across the Curve:
2-Year: ~60-65%
5-Year: ~65-70%
10-Year: ~70-75%
20-Year: ~80-85%
30-Year: ~85-90%
Why It Matters:
A ratio below 100% reflects munis’ tax-exempt advantage—lower yields still beat Treasuries after-tax for high-bracket investors. Ratios above 80% (especially at the long end) signal munis are relatively cheap compared to Treasuries, potentially offering value if you’re in a high tax bracket. For example, a 30-year ratio of 90% with a 4.0% muni yield equates to a taxable-equivalent yield of about 6.3% at a 37% federal tax rate, outpacing the 4.5% Treasury.
#MuniBond #MuniBonds #MunicipalBonds #Munis #TBillandChill #TBillnChill #WatkinsonMuniBonds #WatkinsonMunicpalBonds #MunicipalBondSMA #GetRealStayRich #TaxEquivalentYield #TEY