Report published September 25, 2026

The Return of 10% Munis: Bank of America Municipal Market Weekly Update

Bank of America · September 25, 2026

Surging economic data and a hawkish Federal Reserve have pushed Treasury and municipal yields toward multi-year peaks, lifting taxable-equivalent municipal yields above 10% in high-tax states. Despite the selloff, municipal credit fundamentals remain sound, although BBB credit spreads have tightened to rich levels.

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Finvaulta summarizes Bank of America's analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.

Key Takeaways

1.Strong PMI data and hawkish Fed rate expectations triggered a sharp rates selloff and bear-flattening in Treasuries, pushing muni yields higher while remaining highly attractive.
2.Taxable-equivalent muni yields have crossed 10% for high-tax-state investors, presenting compelling relative value against Treasuries and corporate bonds.
3.BBB municipal spreads are at their 52-week tights and screening very rich based on z-score analysis, especially within the 12-22 year maturity segment.

Key takeaways
Market views and strategies
10yr AAA challenging Apr-25 peak
10% taxable equivalent yields
BBB spreads are rich
Performance
Supply & demand
Curve
Relative value
Trade activity
Credit corner
State & local governments
Mass Transit
Defaults, distress & HY
Acronyms

Report data

Exhibit 4: 8%, 9% or even 10% taxable equivalent yields in some states at certain parts of the curve — as of September 23, 2026.

Metric	Estimate	Context
10yr AAA MMD Yield	3.86%	Cheapest level since 9 April 2025 following rates selloff.
30yr AAA MMD Yield	4.93%	Highest yield since 10 February 2011.
Municipal Tax Exemption Value	312 bp	Difference between U0A0 YTW and its taxable-equivalent yield using top federal rate of 37% + 3.8% Medicare surtax.
BBB to AAA Municipal YTW Spread	72 bp	At 52-week tight and very rich on z-score analysis.
YTD Municipal Issuance	458.02 USD billion	New money issuance rose 1% y/y while refundings rose 25% y/y.

Source: LSEG Data & Analytics; BofA Global Research; ICE Data Indices, LLC; LSEG Data & Analytics, Bloomberg. This is a dated model snapshot, not a live forecast.