Municipal Market Update | July 2025
Summary
Municipal bond indices continued their downward trend in yields through July, with the front end of the curve leading the move. The Bloomberg 1-Year Index saw a ~24bps drop in YTW, contributing significantly to index performance. The 5-Year and 15-Year also saw modest declines in YTW, reflecting continued strength in short and intermediate maturities.
Issuance remained robust, extending the recordsetting 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 | |
|---|---|---|---|---|
| Bloomberg 1 Year (1-2) Municipal Bond Index | 2.65 | 4.42 | 1.24 | 2.40 |
| Bloomberg 5 Year (4-6) Municipal Bond Index | 2.96 | 4.94 | 3.65 | 3.15 |
| Bloomberg 1-15 Year Municipal Bond Index | 3.48 | 5.80 | 5.07 | 1.35 |
| Bloomberg Taxable U.S. Aggregate Bond Index | 4.64 | N/A | 5.97 | 3.75 |
Municipal & Tax Equivalent Yields (%)
The Treasury yield curve saw moves higher across all maturities in July. Municipal bonds saw mixed moves with the long end of the yield curve widening out slightly while short maturities continued to tighten. Value remains concentrated in short maturities and past 10-year calls.
While the municipals/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 | 4.10 | 4.29 | 2.46 | 4.09 | 2.66 | 4.43 |
| 3Y | 3.90 | 4.22 | 2.49 | 4.15 | 2.72 | 4.54 |
| 5Y | 3.97 | 4.42 | 2.63 | 4.39 | 2.91 | 4.85 |
| 7Y | 4.16 | 4.66 | 3.00 | 5.01 | 3.29 | 5.49 |
| 9Y | 4.30 | 4.87 | 3.34 | 5.56 | 3.62 | 6.03 |
| 10Y | 4.38 | 4.96 | 3.50 | 5.84 | 3.77 | 6.29 |
| 15Y | 4.64 | 5.35 | 4.29 | 7.16 | 4.47 | 7.45 |
| 20Y | 4.90 | 5.59 | 4.74 | 7.90 | 4.90 | 8.17 |
| 25Y | 4.90 | 5.65 | 4.90 | 8.17 | 5.08 | 8.47 |
| 30Y | 4.90 | 5.67 | 4.97 | 8.28 | 5.18 | 8.64 |
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.
SBH Municipal Fixed Income Platform
Source: All data from Bloomberg as of 7/31/25.
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 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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