Takeaways
- The municipal-bond market is logging its worst performance relative to US government debt since the start of the pandemic, with state and local government debt losing about 1% this year.
- The lackluster performance is due to a mismatch in supply and demand, with municipal borrowing surging and a depletion of federal-stimulus aid.
- Vikram Rai, a portfolio manager at First New York, said “Performance is going to deteriorate even further” and expects supply to remain elevated, reaching as high as $600 billion by the end of 2025.
The municipal-bond market is logging its worst performance relative to US government debt since the start of the pandemic, as a burst of new bond sales pressures prices.
State and local government debt has lost about 1% this year, trailing the 3% gain on US Treasury securities by roughly 4 percentage points, according to data compiled by Bloomberg.
Bloomberg Markets
By Aashna Shah and Elizabeth Rembert
July 25, 2025