U.S. Municipal Bonds Drop 4.7% in September, Worst Monthly Loss in Nearly 40 Years
nashnova research
US municipal bonds posted a 4.7% total-return loss in September, on track for the worst single month since 1987; inflation fears and hawkish Fed expectations drove the sell-off, but valuations have fallen to levels rarely seen in recent years.
How bad is the drop, and how rare?
Per the Bloomberg index, US state and local government bonds fell 4.7% in total return in September.
This means → if the level holds through month-end, it will be the worst single month since 1987 — a decline not seen in nearly four decades.
In plain terms = munis are normally among the quietest assets; a near-5% monthly loss is the fixed-income equivalent of a shock.
What triggered such a sharp sell-off?
The immediate catalyst is inflation anxiety: the US–Iran conflict continues to push energy costs higher, reviving fears of sticky prices.
This reflects a broader bet that the Fed will stay hawkish, triggering a global bond rout in which munis bore the brunt.
The 1-year benchmark muni yield rose more than 100 basis points within the month; the 30-year benchmark climbed over 60 basis points — the spike in borrowing costs has already led some issuers to delay planned offerings.
What does "relatively cheap" actually mean here?
The ratio of muni yields to US Treasury yields — a key gauge of relative value — measures how much extra return munis offer.
The 10-year muni yield sits at roughly 80% of the comparable Treasury; the 30-year ratio has risen to about 95%.
In plain terms = the higher the ratio, the cheaper munis are relative to Treasuries — at 95%, the 30-year is near parity, a level that has historically been uncommon and short-lived.
What are institutions saying — is it time to buy the dip?
AllianceBernstein portfolio managers Daryl Clements and Daniel Carpenter urged investors to lean in, citing higher yields and more attractive valuations.
If you liked munis yesterday, you should love them today.
Daryl Clements / Daniel Carpenter
Portfolio Managers, AllianceBernstein
(research note)
市场有风险，内容仅供研究参考，不构成投资建议。