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Muncipal bonds
Convergence creates opportunity: Multiple dynamics align for municipal outperformance
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2026 municipal market outlook
The municipal bond market stands at an inflection point. Following an extended period of underperformance relative to other fixed income segments, we think municipals are positioned to deliver in 2026.
Multiple tailwinds are converging to create what we believe will be a favorable environment for the asset class. Though headwinds persist, disciplined credit analysis and active management can unlock compelling tax-advantaged, risk-adjusted returns for municipal bond investors.
Key takeaways on municipal activity
- Sustained inflows are expected to return to munis. Fed rate cuts are likely to accelerate cash migration into other safe, higher-yielding asset classes.
- Supply should remain elevated. Higher levels of supply support attractive valuations and should provide ample investment opportunities.
- Income should drive outperformance. High absolute yields should provide strong income, while relatively wide credit spreads are positioned to tighten, potentially enhancing total returns.
- Credit fundamentals should remain resilient. Policy headwinds require selective positioning in proven sectors to mitigate risk.
Download our full 2026 outlook
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The views and opinions expressed are 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 market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. 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 market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Performance data shown represents past performance and does not predict or guarantee future results. Investing involves risk; principal loss is possible.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. 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
Investing in fixed income investments involves risks such as market risk, credit risk, interest rate/duration risk, call risk, tax risk, political risk, economic risk, and income risk. 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. Credit risk refers to an issuers ability to make interest and principal payments when due.
Municipal Bond 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 advisor 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.
