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Municipal bonds
Muni Minute: Municipals post gains as shutdown ends
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Key takeaways
- The U.S. government shutdown ended after a historic 43 days. Munis faced minimal impact and outperformed Treasuries during the time frame.
- High yield municipals outperformed investment grade municipals for the second consecutive week as spreads tightened.
- The higher education sector was in the news again as international student applications fell. With wider spreads, credit selection remained critical to finding opportunities.
Market recap
Municipal bonds had another positive week of returns last week. Through Thursday’s close, the AAA municipal curve was unchanged while U.S. Treasury yields were marginally higher. Investors reduced expectations for FOMC rate cuts as Federal Reserve speakers last week pointed to policy uncertainty. Some delayed economic data releases caused by the shutdown may be incomplete or forgone, adding to potential rate volatility. Data released last week revealed lower international student applications to U.S. universities which pressured the higher education sector.
How is supply trending?
Lighter new issuance last week ended at $10B. This week’s supply is projected around $13B.
Market impact: Lower supply and heavier secondary volumes kept rates in check, pushing municipal returns to positive territory for the week.
What do yields look like?
The municipal yield curve was flat last week as volume ticked up.
| Municipal market yield (%) | |
|---|---|
| 5-year | 2.41 |
| 10-year | 2.75 |
| 30-year | 4.14 |
What are flows doing?
LSEG Lipper reported municipal fund inflows for the week ending 12 Nov, totaling +$405 million. This marks the 9th week of inflows over the last 11 weekly sessions.
| OEFs | -$75M |
| ETFs | +481M |
| Long-term OEFs | -$166M |
| Long-term ETFs | +183M |
Longer-dated municipal bonds have offered meaningful opportunity to achieve higher tax-efficient yields.
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Endnotes
Sources
Performance: Bloomberg, L.P. Issuance: J.P. Morgan, 14 Nov 2025. Fund flows: Lipper.
Any reference to credit ratings refers to the highest rating given by one of the following national rating agencies: S&P, Moody’s or Fitch. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings.
This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or investment strategy, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors.
Representative indexes: muni bond 5-year: Bloomberg Municipal Bond 5 Year (4 – 6) Index; muni bond 10-year: Bloomberg Municipal Bond 10 Year (8 – 12) Index; muni bond 15-year: Bloomberg Municipal Bond 15 Year (12 – 17) Index; muni long bond: Bloomberg Municipal Long Bond (22+) Index; muni bond 3 – 15 year blend: Bloomberg Municipal 3 – 15 year blend (2 – 17) Index; muni AAA: Bloomberg Municipal AAA Index; muni AA: Bloomberg Municipal AA Index; muni A: Bloomberg Municipal A Index; muni BBB: Bloomberg Municipal BBB Index; municipal bond: Bloomberg Municipal Bond Index; muni high yield: Bloomberg High Yield Municipal Index; U.S. aggregate bond: Bloomberg U.S. Aggregate Bond Index; U.S. Treasury: Bloomberg U.S. Treasury Index; U.S. government related: Bloomberg U.S. Government-Related Index; U.S. corporate investment grade: Bloomberg U.S. Corporate Index; U.S. high yield corporate: Bloomberg U.S. Corporate High Yield Index.
This material, along with any views and opinions expressed within, are presented for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as changing market, economic, political, or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. There is no promise, representation, or warranty (express or implied) as to the past, future, or current accuracy, reliability or completeness of, nor liability for, decisions based on such information, and it should not be relied on as such. This material should not be regarded by the recipients as a substitute for the exercise of their own judgment. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager.
This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of yields and/or market returns, and proposed or expected portfolio composition. No representation is made that the performance presented will be achieved, or that every assumption made in achieving, calculating or presenting either the forward-looking information or the historical performance information herein has been considered or stated in preparing this material. Any changes to assumptions that may have been made in preparing this material could have a material impact on any of the data and/or information presented herein by way of example.
For term definitions and index descriptions, please access the glossary on nuveen.com. Please note, it is not possible to invest directly in an index.
Important information on risk
Past performance is no guarantee of future results. All investments carry a certain degree of risk, including the possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Certain products and services may not be available to all entities or persons. There is no guarantee that investment objectives will be achieved.
Investing in fixed income investments involves risks such as market risk, credit risk, interest rate/duration risk, call risk, tax risk, political and economic risk, derivatives risk, and income risk. Credit risk refers to an issuers ability to make interest and principal payments when due. Typically, the value of, and income generated by, fixed income investments will decrease, or increase based on changes in market interest rates. As interest rates rise, bond prices fall and as interest rates fall, bond prices rise. Income is only one component of performance and investors should consider all of the risk factors for an asset class before investing.
Investing in municipal bonds involves risks such as market risk, credit risk, interest rate/duration risk, call risk, tax risk, political and economic risk, derivatives risk, and income risk. Credit risk refers to an ability to make interest and principal payments when due. Typically, the value of, and income generated by, muni bonds will decrease, or increase based on changes in market interest rates. As interest rates rise, bond prices fall and as interest rates fall, bond prices rise. Income is only one component of performance and investors should consider all of the risk factors for an asset class before investing. Income is generally exempt from regular federal income tax and may be subject to state and local taxes, based on the investor’s state of residence, as well as to the federal alternative minimum tax (AMT). Capital gains, if any, are subject to tax. Income from municipal bonds could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. Please contact a tax professional regarding the suitability of tax-exempt investments as this information should not replace a client’s consultation with a financial/tax professional regarding their tax situation. Nuveen and its investment specialists do not provide tax advice.
Taxable-equivalent yields are based on the highest individual marginal federal tax rate of 37%, plus the 3.8% Medicare tax on investment income. Individual tax rates may vary.
Nuveen, LLC provides investment solutions through its investment specialists.
This information does not constitute investment research as defined under MiFID.
