Muni Bonds See Longest Winning Streak Over Treasuries Since 2014

America’s municipal bonds are staging their longest winning streak against Treasuries in seven years.

State and local debt has benefited from a surge of cash in 2021 that’s showed no signs of letting up, with President Joe Biden’s plans for higher taxes on the wealthy catalyzing demand for the bonds that pay tax-free interest. That flood of money has helped municipal returns’ beat Treasuries for seven straight months through April, with state and local debt posting a gain of 0.8% last month, according to Bloomberg Barclays indexes.

Beating the Competition

But with debt sales by states and cities poised to pick up and investor resistance to the historically rich levels rising, May could snap the winning streak. Already, benchmark muni yields have ticked up about five basis points since the start of last week. John Miller, head of municipals at Nuveen, noted in a May 3 note that selloff brought the securities closer to fair value.