Archive · 1 Oct 2026
Municipal Bonds Rally Sharply After Nearly Two-Week Selloff
Municipal bonds are loans that help state and local governments pay for projects.
Their prices rose after falling for almost two weeks.
When bond prices rise, their yields usually fall.
Ten-year bond yields had their biggest one-day drop in more than a year.
One analyst said the market may simply have been oversold and was correcting.
Another possibility is that the rally will not last.
Higher yields attracted some buyers who had been waiting.
Nashville’s convention center authority also moved forward with a large bond sale.
Benchmark 10-year municipal yields fell 11 basis points to 4.11%, their largest one-day decline since April 2025.
Thirty-year municipal yields dropped 6 basis points to 5.19%.
Analysts said the rally may reflect an oversold market and buyers returning as yields rose.
Municipal returns were down about 5% for the month, their worst monthly performance since 1987 if sustained.
Nashville’s convention center authority is offering approximately $790 million in municipal bonds after delaying and enlarging the deal.
- Who
- State and local bond investors, analysts, and the Convention Center Authority of the Metropolitan Government of Nashville and Davidson County.
- What
- Municipal bonds rallied across the maturity curve after a nearly two-week selloff.
- When
- The rally was reported Tuesday, with the 10-year benchmark’s first gain since Sept. 17.
- Where
- In the US municipal bond market; a major new offering came from Nashville and Davidson County.
- Why
- Analysts attributed the rally to an oversold market and higher absolute yields that encouraged buyers to return, while issuers sought an opportunity to sell bonds.
Rally as Market Correction
Rally May Not Last
Meaning of the rebound
Rally as Market Correction
Dora Lee said the market appeared oversold, making the move a correction after the selloff.
Rally May Not Last
Lee questioned whether the move was only a temporary “dead cat bounce.”
Near-term market outlook
Rally as Market Correction
Leslie Martin said higher absolute yields had brought some buyers off the sidelines and could provide greater stability.
Rally May Not Last
The outlook remains uncertain because analysts cited the possibility of Federal Reserve rate hikes later on.
- 10-year yield
- 4.11%, down 11 basis points
- 30-year yield
- 5.19%, down 6 basis points
- Monthly municipal returns
- Down about 5% as of Tuesday
- Monthly performance outlook
- On track for the worst monthly performance since 1987
- Nashville bond offering
- Approximately $790 million
- Market context
- The rally followed nearly two weeks of selling and coincided with broader September fixed-income losses