Jessica Lerner

"Historically, the weeks leading up to the April 15 tax day have been challenging for the municipal market, often due to weaker supply and demand dynamics," said Sam Weitzman, a product manager at Western Asset.

Munis saw small gains Thursday, continuing the slight turnaround in sentiment the market has seen this week, with muni yields seeing modest bumps each day, said Jeremy Holtz, a portfolio manager at Income Research + Management.

Issuance was $50.081 billion in 697 issues, up 17.3% year-over-year from $42.709 billion across 726 transactions.

Many investors are waiting to see if the pattern of falling yields continues, according to Chris Brigati, managing director and CIO at SWBC.

The new hires come as nationwide infrastructure needs keep growing and as several firms have left or scaled back their muni efforts.

This strength comes after another "challenging week" for the muni market, which continued to deal with ongoing macroeconomic uncertainty and somewhat heavy supply, said Daryl Clements, a muni portfolio manager at AllianceBernstein.

Ending a challenging week with ongoing geopolitical tensions and rising oil prices, muni yields were cut one to four basis points, depending on the scale.

Investors pulled $600 million from municipal bond mutual funds in the week ended Wednesday, according to LSEG.

"Rates, not fundamentals, continue to drive benchmark yields higher, leaving munis on track for their fourth-worst monthly performance in 15 years," said James Pruskowski, managing director at Hennion & Walsh.

"You would think global instability leads to flight for quality, but you also have the inflationary pressures that come with higher oil prices. I would say the inflationary pressures have been winning, and that's why you're seeing Treasury and muni rates move higher," said Keith Richard, head of public finance at Siebert Williams Shank.

The weakness in fixed-income markets comes after stocks and bonds saw strength Monday following President Donald Trump's announcement of a five-day pause on strikes on Iranian power plants amid talks between the two countries.

"We are in interesting times as the market must now balance these robust technicals against a backdrop of geopolitical tension in the Middle East and the nomination of Kevin Warsh, whose hawkish reputation is already being weighed by participants," said Jason Wong, vice president of municipals at AmeriVet Securities.

"The secondary infrastructure demands [of data centers] will increasingly flow through to municipal balance sheets, driving incremental issuance across multiple sectors," said J.P. Morgan strategists.

While it's unclear how long the war in the Middle East will drag on, once President Donald Trump announces an end to the war, things could change "on a dime," as happened with the tariff-induced volatility in April 2025, said Peter Block, managing director of credit strategy at Ramirez.

"Looking at where oil was and the potential for disruption, and this being tax season and issuers having to pull deals, there's no reason why yields wouldn't have been higher," said Matt Fabian, president of Municipal Market Analytics.

With front-end rates off so much Thursday morning, "liquidity providers backed off noticeably in the morning in terms of bid with offers slow to follow," said Matt Smith, founder and CEO of Spline Data, noting it was likely a response to elevated bids wanted counts, along with rates.

Currently, it's a Goldilocks market, said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital: "Just right enough for just enough people, and steady [enough] that there doesn't seem to be any [big] price pressure at the moment."

There is a lot of money out there, and investors seem comfortable putting it to work.

"A lot of the perception is the Iran situation and energy and everything else is temporary, so if municipal yields are higher, let's take advantage of it," said Pat Luby, head of municipal strategy at CreditSights.

If "we get another day of this, that will help the markets continue to trade in a better place," said Jock Wright, an underwriter at Raymond James.