Municipal Market Update | August 2025
Summary
Municipal bond index performance continued their strength in August, with yields declining across most maturities. The Bloomberg 1-Year Index saw a noticeable drop in YTW of ~15bps. This front-end rally was supported by persistent demand for high-quality, short-duration paper amid ongoing rate volatility.
Issuance remained elevated, extending the record-setting pace in the first half of the year.
Major Municipal Bond Index Returns (%)
| Yield to Worst | Tax Adjusted Yield to Worst (40% Tax Rate) | Duration (years) | YTD Return | |
|---|---|---|---|---|
1 Year (1-2) Bloomberg Municipal Bond | 2.50 | 4.17 | 1.27 | 2.81 |
5 Year (4-6) Bloomberg Municipal Bond | 2.82 | 4.70 | 3.66 | 4.01 |
1-15 Year Bloomberg Municipal Bond Index | 3.36 | 5.61 | 5.11 | 2.20 |
Bloomberg Taxable U.S. Aggregate Bond Index | 4.44 | N/A | 5.94 | 4.99 |
Municipal & Tax Equivalent Yields (%)
The Treasury yield curve saw moves lower across most maturities in August, except in the long end where yields widened slightly. Municipal bonds saw lower yields across all maturities, the biggest moves coming in the front end of the yield curve. Value remains concentrated in short maturities and past 10-year calls.
While the Municipal/Treasury yield ratios remain challenging, we continue to see value in high grade municipals, particularly versus longer duration corporate bonds.
| Treasuries | Industrials (A) | Muni AA Revenue | AA Revenue Muni at 40% Tax Rate | Muni A Revenue | A Revenue Muni at 40% Tax Rate | |
|---|---|---|---|---|---|---|
1Y | 3.84 | 4.02 | 2.32 | 3.87 | 2.44 | 4.06 |
3Y | 3.58 | 3.94 | 2.35 | 3.92 | 2.49 | 4.14 |
5Y | 3.70 | 4.16 | 2.54 | 4.23 | 2.69 | 4.48 |
7Y | 3.93 | 4.44 | 2.92 | 4.86 | 3.06 | 5.11 |
9Y | 4.13 | 4.70 | 3.25 | 5.42 | 3.40 | 5.67 |
10Y | 4.23 | 4.81 | 3.45 | 5.75 | 3.59 | 5.99 |
15Y | 4.55 | 5.27 | 4.22 | 7.03 | 4.34 | 7.23 |
20Y | 4.87 | 5.55 | 4.66 | 7.77 | 4.81 | 8.01 |
25Y | 4.90 | 5.64 | 4.85 | 8.08 | 4.99 | 8.32 |
30Y | 4.93 | 5.67 | 4.91 | 8.18 | 5.06 | 8.44 |
Yield Curve (%)
As the curve inversion dissipates, we have still been applying a barbell approach. The curve has steepened modestly, and we are seeing more favorable roll dynamics throughout the yield curve.
Municipal/Treasury Ratios (%)
The wider spreads between the below data points indicate a steeper curve when compared to Treasuries. Longer ratios have widened out slightly from the start of the year, while shorter ratios have tightened the last few months.
SBH Municipal Fixed Income Platform
Source: All data from Bloomberg as of 8/29/25.
A basis point is a standard measure for interest rates and other percentages in finance. This update provides an overview of certain broad-based Fixed Income benchmarks and does not include performance of the Segall Bryant & Hamill LLC (dba CI Segall Bryant & Hamill Asset Management) Fixed Income styles. Past performance cannot guarantee future results. All investments involve risk, including the possible loss of capital. An investor cannot invest directly in an index. All opinions expressed in this material are solely the opinions of Segall Bryant & Hamill. You should not treat any opinion expressed as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of the manager’s opinions. The opinions expressed are based upon information the manager considers reliable, but completeness or accuracy is not warranted, and it should not be relied upon as such. Market conditions are subject to change at any time, and no forecast can be guaranteed. Any and all information perceived from this material does not constitute financial, legal, tax or other professional advice and is not intended as a substitute for consultation with a qualified professional. The manager’s statements and opinions are subject to change without notice, and Segall Bryant & Hamill is not under any obligation to update or correct any information provided in this material.
The Bloomberg 1 Year (1-2) Municipal Bond Index measures the performance of municipal bonds with time to maturity of more than one year and less than two years. The Bloomberg 5 Year (4-6) Municipal Bond Index measures the performance of municipal bonds with time to maturity of more than four year and less than six years. The Bloomberg U.S. 1-15 Year Municipal Bond Index measures the performance of USD-denominated long-term, tax-exempt bond market with maturities of 1-15 years. The Bloomberg Taxable U.S. Aggregate Bond Index is a broad-based fixed-income index used by bond traders. An investor cannot invest directly in an index. Yield to Worst is the lowest potential bond yield received without the issuer defaulting; it assumes the worst-case scenario, or earliest redemption possible under terms of the bond. Duration is a calculation of the average life of a bond (or portfolio of bonds) that is a useful measure of the bond's price sensitivity to interest rate changes. The higher the duration number, the greater the risk and reward potential of the bond.
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