Municipal bond yields have risen to 3.62% for top-bracket investors, the highest level since April 2025, as weakness in the US Treasury market, heavier issuance and softer reinvestment demand pressure the sector. The yield is roughly 6.1% on a tax-equivalent basis, keeping munis competitive with investment-grade corporate bonds while potentially offering state-tax exemptions for in-state buyers. Municipal bond funds recorded about $460 million in net outflows on September 9, the largest such outflow since April 2025. The latest selling contrasts with $46 billion in year-to-date fund inflows reported by early June 2026, which represented the second-highest pace on record. Issuance exceeded $585 billion in 2025 and is projected at about $600 billion in 2026. Municipal bonds had returned 1.74% year to date, outperforming corporate bonds and Treasuries over the same period. The market’s outlook depends on whether demand absorbs projected supply, yields stabilize and Treasury markets and municipal credit fundamentals remain supportive.