The approaching summer months can be a good time to enter the muni market amid stronger reinvestment demand, but the ongoing conflict in the Middle East, past mixed performance and surging supply have complicated this.
"Reinvestment demand is transitioning as redemptions rise off winter lows and toward summer peaks," said Matthew Gastall, head of municipal research and strategy at Bloomberg Intelligence.
June redemptions are $44.4 billion. July and August will see $37.7 billion and $38.4 billion returned, respectively, said Pat Luby, head of municipal strategy at CreditSights.
The market has already started to focus on July reinvestment, though, as June reinvestment is mostly over, said Matt Fabian, president of Municipal Market Analytics.
While June 1 cash hasn't been paid out yet, most individual investors begin to buy on margin in the week before, he said.
The market felt "grabby" Wednesday morning, so "I wouldn't be surprised if we see bumps because it just looks that much stronger," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.
A lot of that is just people pre-investing, especially the June 1 money, she noted.
"Buying typically runs ahead of the actual maturity date by a week or sometimes a few weeks," Fabian said.
There may still be some money that will turn into cash on June 1, but much of the June reinvestment will have already been anticipated with customer buys, he noted.
Currently, investors seem to have an "extended window to execute spring dollar-cost-averaging strategies," Gastall said, given the "annual pre-summer 'supply push' and heightened geopolitical anxieties.
"Rate pullbacks, institutional selling, and/or persistent fund outflows may enhance such periodic long-term entry," he said.
"If Strait of Hormuz tensions ease, broader economic considerations — concerning margins, output and employment — may later surface as municipal seasonals firm, providing potential strength for summer, or possibly second-half, pricing," Gastall said.
"However, given persistent geopolitical uncertainties and this year's record-setting pace of issuance, investors should prioritize patient, tactical execution over aggressive, all-in positioning," he said.
The big thing looming for financial markets is the Iran peace talks, which have been in the background since February, said Dora Lee, director of research and partner at Belle Haven.
Markets rallied Tuesday on the news of a possible ceasefire agreement with Iran, following the "self-defense" strikes from the U.S. and the claim of retaliation from Iran.
By Thursday morning, the prospect of a resolution to end the war had improved, as Axios reported a 60-day extension of the ceasefire and for negotiations to begin on Iran's nuclear program. The deal still needs to be approved by President Donald Trump, the outlet reported.
Equities rose on the news, while USTs firmed. Munis were little impacted.
"Everything is sort of pending what happens with the Middle East, [a] better framework that comes out and helps oil, pushes inflation a little lower," said Olsan.
Outside of geopolitics, additional factors weigh on whether right now is a good buying opportunity.
For one, stronger reinvestment demand doesn't always translate to stronger market returns.
In 2025, June and August saw gains of 0.62% and 0.87%, respectively, but July saw losses of 0.20%.
All three months saw positive returns in 2024, which corresponded with Federal Reserve stability, but in 2023, at the height of a tightening cycle, the market was mostly flat before munis saw losses of 2.93% in September 2023, Olsan noted.
"The expectation of a strong market return playing into the redemption cycle is a little misguided," Olsan said.
Furthermore, July and August are usually "good months" but weren't last year due to an influx of supply, said Chad Farrington, co-head of municipal bond investment strategy at DWS.
Issuance was $58.963 billion in July and $56.001 billion in August, the highest monthly issuance figures, according to LSEG.
Currently, issuance is at $226.482 billion to date, up 5.7% year-over-year, per LSEG.
"If you get that pickup in supply in June, July, and/or August, then it might not be" a good buying time, Farrington said.
Conversely, yields are compelling, so that's why "you're seeing the cash come into the market," he said.
If there's a time to reenter and reinvest at higher rates, depending on where that cash came from, it's a great time to lock in those yields, Lee noted.
For a long time, new issuance trends have been flat, so it's nice to have this reinvestment met with this new supply, so you're not "playing musical chairs" every year, she said.
