Should I Buy Municipal Bond Funds Now May 2026

Those in the highest federal tax brackets benefit most from the tax-exempt status of municipal interest.

Heavy new issuance—projected to reach $600 billion in 2026—can create technical headwinds and put pressure on prices if demand softens.

Inflation concerns and rising oil prices caused a sharp rise in yields in March, which typically leads to a decline in bond prices. should i buy municipal bond funds now

The municipal yield curve remains historically steep. Analysts at Morgan Stanley suggest that 20-year AA-rated munis offer taxable-equivalent yields of nearly 7% , significantly higher than comparable corporate bonds.

Munis have a low correlation with the S&P 500 (~0.222), making them effective diversifiers when equities are at all-time highs. Key Risks to Watch Those in the highest federal tax brackets benefit

Despite volatility, tax-exempt funds and ETFs saw strong positive net inflows of approximately $32 billion through late March. Who Should Consider Buying?

Benchmark 10-year tax-exempt yields rose sharply in March, closing at 3.06% , up from 2.47% in February. The municipal yield curve remains historically steep

Following a market pullback in March, municipal bond valuations have strengthened, offering attractive value relative to other fixed-income sectors.