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Fears of escalation in Iran spur rising UST yields, minor muni losses

BY SourceMedia | MUNICIPAL | 05/04/26 04:19 PM EDT By Christina Baker

Munis grew slightly cheaper on Monday, as news from the Middle East drove larger losses in U.S. Treasuries and equities.

Muni yields rose up to two basis points, depending on the curve. UST yields rose five to seven basis points, with the 20-year and 30-year maturities both passing 5%.

The market's movements were driven by fears of escalation in the Middle East, according to Chris Brigati, managing director and CIO at SWBC; there's little news domestically that could cause a significant market reaction, he added. He doesn't expect the geopolitical tensions to cause similar losses in the muni market unless oil prices or Treasury yields move significantly higher.

"I think the municipal market has hung in pretty well, and that's a testament to the demand being strong, heavy cash inflows into funds and [exchange-traded funds], and just the overall demand side of the equation being robust," Brigati said.

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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