Muni Monthly—November 2025

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Performance Overview

Munis posted below average returns in November.

Municipals posted positive returns in November as indicated by the Bloomberg Municipal Bond Index total return of 0.23%, which was below the prior 10-year average November return of 1.16% during this seasonally stronger month. Munis generally underperformed Treasuries and corporates, which returned 0.62% and 0.58%, respectively, with those sectors reacting more favorably to weaker-than-anticipated economic data released during the month.

Supply and Demand Technicals

Tax-exempt muni supply maintained an elevated pace throughout the year.

A softer supply-and-demand technical backdrop was a key contributor to municipals’ November underperformance. New-issue volume remained robust amid a record issuance year, with total volume reaching $45 billion, nearly double the level seen in November 2024. The $40.6 billion of tax-exempt supply marked the second-highest November on record over the past decade.

On the demand side, investor flows decelerated heading into year-end. Lipper reported $2.3 billion of net inflows into municipal mutual funds, down sharply from October’s $6.5 billion. Demand con-tinued to concentrate in longer-maturity funds, with the long-term category attracting $1.5 billion of net inflows.

Fundamentals

Upgrades continued to outpace downgrades in November.

Despite a modest slowdown in upgrade momentum relative to downgrades, upgrades continued to outpace downgrades by nearly a 2-to-1 margin in November. A notable highlight was Moody’s upgrade of the School District of Philadelphia’s general obligation bonds to Baa1 from Baa2, driven by sustained operating improvement and strengthened liquidity. The upgrade extends a decade-long credit recovery for the district, which was rated as low as Ba3 in 2014 and has now achieved four successive upgrades from the agency.

Valuations

Municipals generally offer higher after-tax yield advantages now than at the start of the year.

The muni underperformance in November aligns with themes observed throughout much of 2025: weaker technicals, rather than deteriorating fundamentals, have created attractive long-term in-come opportunities. While yields on the Bloomberg US Treasury and Corporate Indexes declined 63 basis points (bps) and 57 bps year-to-date (YTD) through November 30, 2025, respectively, the Bloomberg Municipal Bond Index yield fell only 16 bps and the Bloomberg Long Municipal Bond In-dex yield rose 19 bps over the same period. As a result, the after-tax income advantage of munis relative to comparable taxable fixed-income alternatives has increased across most maturities and credit quality structures. We believe this attractive relative value should continue to support steady demand, particularly if the Federal Reserve continues to reduce front-end rates in the near term.

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