March 2026 Performance Overview
The S&P Municipal Bond Investment Grade Index declined by 2.112% in March, as a sharp rise in municipal yields—particularly in the intermediate portion of the yield curve—overwhelmed income and spread-related gains.
Other Highlights
- Rates and Curve Dynamics: Municipal yields rose substantially across the curve, with the 5–15 year range experiencing some of the largest single-month increases since September 2022. The resulting parallel shift was the primary driver of negative returns, partially offset by continued curve steepening at the short end.
- Income and Yield Impact: Coupon income remained positive, but market amortization and rising yields led to a net income contribution that was insufficient to counteract price declines.
- Sector and Spread Effects: Overall sector and quality effects were positive, led by significant spread tightening in Tobacco Settlement bonds, along with strength in Housing and Transportation sectors. Spreads on BBB-rated bonds tightened relative to higher-quality securities.
- State Performance: States with shorter average durations generally outperformed as rising yields had a smaller impact. Michigan benefited from relative spread tightening, while states with heavier exposure to underperforming sectors, such as Alabama’s IDR/PCR exposure, lagged.
Despite the negative performance in March, first-quarter 2026 returns remain comparatively strong versus the first quarters of several recent years.
Read the full report for an in-depth understanding of the contributions to the month’s performance.
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