How are municipal bonds doing now?
Christopher Davis
Updated on February 21, 2026
Hear this out loudPauseThe S&P Municipal Bond Index returned 0.29% for the month, bringing the year-to-date total return to 1.24%. Lower credit quality and longer duration bonds outperformed. Issuance totaled a robust $48 billion, up 40% month- over-month and 23% above the 5-year average, bringing the year-to-date total to $221 billion.
Are municipal bonds good investments?
Hear this out loudPauseInvesting in municipal bonds is a good way to preserve capital while generating interest. Most of them are exempt from federal taxes, and some are tax-free at the state and local level as well. 1 Municipal bonds, also called munis, help build infrastructure in your area.
What is true about municipal bonds?
Hear this out loudPauseMunicipal bonds (or “munis” for short) are debt securities issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways or sewer systems. Generally, the interest on municipal bonds is exempt from federal income tax.
What are the pros and cons of municipal bonds?
Pros and cons of municipal bonds
| Pros | Cons |
|---|---|
| Tax-exempt from federal and possibly state and local income tax. | If interest rates rise, market prices of existing bonds will go down. |
| Low volatility; safe investment. | Don’t hold up against inflation as well as stocks. |
| Low default risk. | Still a chance of default. Ex: Detroit. |
What is the downside of municipal bonds?
Hear this out loudPauseThe only real disadvantage of municipal bonds is that they carry relatively low interest rates compared to other types of securities. This is particularly true when the economy is strong and interest rates for Treasury bills and CDs rise.
What are the risks of investing in municipal bonds?
Investors in municipal bonds face a number of risks, specifically including: Call risk. Call risk refers to the potential for an issuer to repay a bond before its maturity date, something that an issuer may do if interest rates decline — much as a homeowner might refinance a mortgage loan to benefit from lower interest rates.
How long does it take for a municipal bond to mature?
Short-term bonds mature in one to three years, while long-term bonds won’t mature for more than a decade. Generally, the interest on municipal bonds is exempt from federal income tax. The interest may also be exempt from state and local taxes if you reside in the state where the bond is issued.
Who is a conduit for a municipal bond?
In addition, municipal borrowers sometimes issue bonds on behalf of private entities such as non-profit colleges or hospitals. These “conduit” borrowers typically agree to repay the issuer, who pays the interest and principal on the bonds.
What happens when a bond is held to maturity?
If bonds are held to maturity, the investor will receive the face value amount back, plus interest that may be set at a fixed or floating rate. The bond’s market price will move up as interest rates move down and it will decline as interest rates rise, so that the market value of the bond may be more or less than the par value.
