Report published August 27, 2026
UBS Strategy: US Municipal Bonds & Tax-Exempt Yield Outlook (August 2026)
Source and citation context
- Issuer
- UBS
- Report date
- August 27, 2026
- Analysis as of
- Not stated in source
Authors / editors: Sudip Mukherjee (Fixed Income Strategist, CIO Americas)
Finvaulta summarizes UBS'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.
UBS maintains a Neutral global asset class preference on US municipal bonds, viewing absolute tax-equivalent yields as attractive but adopting a tactically defensive posture. The CIO favors 1–10-year maturities, 5% coupon structures, and higher-quality AAA/AA credits amid seasonal supply pressure and Treasury rate volatility.
Key Takeaways
- 1.UBS takes a tactically defensive stance in the municipal bond market, favoring the 1–10-year part of the curve due to weaker seasonal technicals and Treasury rate volatility.
- 2.Muni tax-equivalent yields remain attractive at 6.6% overall and ~8% for California and New York investors, providing a strong anchor for long-term performance.
- 3.UBS prefers 5% coupon bonds and high-quality credit (AAAs and AAs), while maintaining caution on small, lower-rated not-for-profit hospitals and private colleges.
Table of Contents
- US municipal bonds
- CIO View: US municipal bonds
- Global Asset Class Preference
- Central scenario
- Upside scenario
- Downside scenario
- Global asset class preferences definitions
- Appendix
- Risk information
- Generic investment research – Risk information
Report data
Stock photo / Graphic asset header
| Metric | Estimate | Context |
|---|---|---|
| Muni Index Tax-Equivalent Yield to Worst (TEY) | 6.6% | Yield level for investors in highest tax brackets across the broad municipal index. |
| California & New York Muni Bond Index TEY | 8.0% | Tax-equivalent yield factoring in state tax-exemption for CA and NY resident investors. |
| Muni 1-10-Year Index Tax-Equivalent Yield | 5.4% | Defensive segment of curve favored by UBS, with an option-adjusted duration of 4 years. |
| Muni 1-10-Year vs AAA-A Corporate 1-10-Year TEY Pickup | 50.0 bps | Tax-equivalent yield pickup provided by 1-10y munis relative to 1-10y AAA-A corporates. |
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Authors / Editors
Reported Data Context
- Muni Index Tax-Equivalent Yield to Worst (TEY): 6.6 % (Current (as of August 2026))
- California & New York Muni Bond Index TEY: 8.0 % (Current (as of August 2026))
- Muni 1-10-Year Index Tax-Equivalent Yield: 5.4 % (Current (as of August 2026))
- Muni 1-10-Year vs AAA-A Corporate 1-10-Year TEY Pickup: 50.0 bps (Current (as of August 2026))