Municipal Bond News 9/28/26

Bond Sharks Circle…Muni Bond Bounty…A 10% Low- Risk Yield? For some, Yes…Bond Yields Push Higher…Brightline Seeks Bankruptcy Protection…Ruling Reinstates Puerto Rico Board Members…Connecticut Earns Positive Outlook…

Bond Sharks Circle…The sharks are circling-and munis are increasingly looking like the opportunity they have been waiting for. The highest yields seen in a generation has drawn serious money, with some of the markets’ largest investment vehicles recording their biggest weekly muni bond orders last week. Retail investors have increased their muni bond holdings over the past year, underscoring how demand is broadening as investors recognize the value currently available in the muni bond market. Trading activity in the muni bond market has also surged, another sign that investors are moving quickly to capitalize on elevated yields rarely available in recent years.

Muni Bond Bounty…Illustrating the yield opportunity, ‘AAA’-rated Texas Water Board sold $900 million bonds last week at a top tax-free yield of 5.24%, while a ‘BBB’-rated $3.5 billion Alabama State Toll Road Bridge & Tunnel Authority 6% coupon new issue currently trades around $104 for a 5.46% tax-free yield. With yields at a 22-year high, the $4.5 trillion muni bond market offers plenty to choose from. Yields of 5%-plus are available from a range of high-quality issuers, including the Port Authority of New York and New Jersey and the City of Los Angeles Department of Airports. A GMS Municipal Bond Specialist can guide investors build customized tax- free bond portfolios tailored to individual circumstances.

A 10% Low-Risk Yield? For some, Yes. MarketWatch Sep 25…Low-risk muni bonds are “on sale” with long-term tax-free yields reaching as high as 5% following the recent bond market turmoil. A 5% tax-free yield is potentially equal to 10% taxable equivalent yield for the highest tax federal income tax bracket earners in New York and California. While the biggest tax savings accrue to those with the highest incomes in the highest-tax locations- But you don’t need to be millionaire to benefit. A 5% tax-free yield is equivalent to about 7.4% taxable for a 32% income tax rate bracket, and 6.4% for a 22% income tax rate payor. Right now, 30-year U.S. Treasury bonds yield near 5.5%, and a long-term investment grade corporate bond indices yield between 6.2% and 6.4%. The math suggests that biggest tax savings accrue to those with the highest incomes in the highest-tax locations, but you don’t need to be millionaire to benefit. Current muni bond yields are a bargain.

Bond Yields Push Higher…Elevated bond yields continued to climb to new highs last week. 30-year muni bond yields hit 5.12% last week, the highest since January 2004, and 10-year tax-free yields crossed 4%, the highest since 2007. Last week saw the biggest one-day rise in bellwether yields in over a year, setting a new 19-year high record for U.S. Treasury yields. Higher oil prices and geopolitical uncertainty led market yields to surge. One factor pushing muni yields higher is record bond issuance, driven in part by infrastructure projects around the country.

Brightline Seeks Bankruptcy Protection…Brightline filed for Chapter 11 bankruptcy protection last week. Assured Guaranty, Nuveen, First Eagle, Invesco, and Nomura have agreed to provide $490 million of new long-term capital to Brightline. Assured and others have also agreed to provide $258 million during the bankruptcy process. Assured Guaranty and other bondholders have agreed to a limited deferral of scheduled interest payments on insured and uninsured senior bonds for a fee. The restructuring proposes no reductions in principal outstanding on the $2.2 billion of senior muni bonds, $1.2 billion of junior unrated muni debt and $985 million of so-called commuter bonds. Assured Guaranty stated that it will pay full and timely interest on insured Brightline bonds. Assured Guaranty- insured Brightline bonds traded around 96.7 cents on Friday.

Ruling Reinstates Puerto Rico Board Members…The U.S. Department of Justice ruled that it does not oppose permanently blocking the White House’s removal of three oversight board members. In 2025, a federal judge temporarily barred President Trump from dismissing board members, citing lack of due process. Since then, litigation has centered on presidential powers and the interpretation of ‘cause’ under PROMESA. However, the DOJ ruling does not preclude future dismissals of board members. Currently, Puerto Rico’s oversight board consists of four members. The oversight board has a crucial role in Puerto Rico electric utility debt resolution.

Connecticut Earns Positive Outlook…Last week, S&P raised its outlook on the State of Connecticut to positive from stable, while affirming its ‘AA-’ rating. Connecticut’s commitment to reducing its high unfunded pension liabilities while sustaining budgetary balance and healthy reserves led to the favorable rating action. “After two decades of credit rating downgrades and rising costs, Connecticut is now experiencing repeated credit rating upgrades, indicating that investor confidence in our state’s fiscal stability is continuing to grow,” Governor Lamont added. “Wall Street is clearly recognizing the hard work Connecticut has done to put our fiscal house in order.”

Compare 30-Year taxable U.S. Treasury yield 5.51% to 30-Year tax-exempt Municipal Bond yield “AAA” 5.12%; “AA” 5.27%; “A” 5.56%. For investors in the 35% federal tax bracket, a 5.12% tax-exempt yield is equivalent to a 7.88% taxable yield. Top-rated long-term tax-free bonds yield 93% of comparable taxable U.S. Treasuries.