Munis poised to outshine fixed income in coming summer redemption season

Munis poised to outshine fixed income in coming summer redemption season
Strategists expect municipal bonds to best Treasuries during the four-month window from May until August, following a historical trend.
MAY 09, 2025
By  Bloomberg

Investors are gearing up for a favorable time of year in the municipal-bond market as state and local government debt is poised to outperform other areas of fixed income over the next few months.

In the summer, new bond sales tend to slow down while money flowing back to investors increases — creating a supply and demand mismatch that boosts prices. The 10-year monthly average returns in May, June and July are positive, according to data compiled by Bloomberg.

“We continue to see a constructive environment for purchasing muni bonds despite a bearish Treasury market,” analysts at Bank of America Corp. said in a Friday research note. “Outperformance of munis vs Treasuries should continue during the May-August time frame.”

Current returns have been lackluster this year, especially after the turbulence that rocked global financial assets — including munis —  after President Donald Trump’s tariffs volley in early April. So far in 2024, municipal bonds have lost 0.81%, underperforming US Treasury debt and corporate securities, according to data compiled by Bloomberg.

In June, July and August, the three months of “summer redemption season,” issuers will return $107 billion of principal and $42 billion of interest, according to a report from analysts led by Pat Luby, senior municipal bonds strategist at CreditSights. On May 1, payments were estimated to include $15 billion of principal and $7 billion of interest. Redemptions this month are expected to be 21% larger than last year, according to CreditSights figures.

Alex Petrone, head of fixed income for Rockefeller Asset Management, said that muni performance should benefit if there’s more stability in the Treasury market and if issuance slows down.

“If issuance slows down — historically it has slowed down in the June, July, August time frame — then that bodes well for a really strong tailwind for munis, particularly if we’re on the precipice of seeing more inflows into the space,” she said.

Still, last summer the calendar was heavy. “It’s a wait and see mode,” she added. 

Latest News

SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees
SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees

Eliseo Prisno, a former Merrill advisor, allegedly collected unapproved fees from Filipino clients by secretly accessing their accounts at two separate brokerages.

Apella Wealth comes to Washington with Independence Wealth Advisors
Apella Wealth comes to Washington with Independence Wealth Advisors

The Harford, Connecticut-based RIA is expanding into a new market in the mid-Atlantic region while crossing another billion-dollar milestone.

Citi's Sieg sees rich clients pivoting from US to UK
Citi's Sieg sees rich clients pivoting from US to UK

The Wall Street giant's global wealth head says affluent clients are shifting away from America amid growing fallout from President Donald Trump's hardline politics.

US employment report reactions: Overall better than expected, but concerns with underlying data
US employment report reactions: Overall better than expected, but concerns with underlying data

Chief economists, advisors, and chief investment officers share their reactions to the June US employment report.

Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading
Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading

"This shouldn’t be hard to ban, but neither party will do it. So offensive to the people they serve," RIA titan Peter Mallouk said in a post that referenced Nancy Pelosi's reported stock gains.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.