US state and local government bonds, known as munis, are approaching their lowest valuations compared to Treasuries in a year. This trend is driven by a combination of high bond issuance, dwindling investor demand, and a general selloff across the fixed-income market. As of September 15, 2026, ten-year municipal debt was offering approximately 74% of the yield on comparable Treasuries, according to Bloomberg data. The muni-Treasury ratio, a key indicator of relative value, reached 74.8% on September 10, marking its highest point since September 2025.
Longer-dated municipal debt has seen an even more pronounced cheapening. The 30-year muni-Treasury ratio hit 92.2% on September 10, also its highest in roughly a year. This movement aligns with a surge in Treasury yields.
The municipal bond market has been experiencing significant pressure, with 10-year benchmark muni yields climbing to 3.62% as of September 10, the highest since April 2025. This increase is attributed to rising Treasury rates and a substantial influx of new muni issues. The sector has also seen considerable outflows, with a $3.6 billion Schwab Municipal Bond ETF experiencing a record $360 million single-day withdrawal last week, contributing to over $530 million in outflows for September.
