Municipal bond asset managers are finding opportunities in the rout that tore through markets this month, with cheaper valuations and the highest yields in years drawing investors. The selloff saw yields on benchmark munis climb to the highest levels since at least 2011, luring retail investors who plowed over $3 billion into Vanguard’s VTEB fund in the last month, marking the best month of inflows since 2022, according to data compiled by Bloomberg.

"We’ve seen just in the last two weeks alone some of the heaviest inflows into our strategies ever in our firm’s history," Andrew Clinton, CEO of Clinton Investment Management, said. "There’s definitely folks out there who are saying, ‘Oh, I can get an equity-like return from my munis. I need to own more of those.’"

Ten-year benchmark munis offered about 81% of the yield on comparable Treasuries as of Tuesday, the highest since April 2025. Recent moves have been driven by inflation fears and rate volatility rather than credit deterioration, creating a more attractive entry point, said Sam Weitzman of Western Asset Management. Higher starting yields allow investors to improve returns without betting on riskier credits.

"From the separately managed accounts perspective, when high-quality munis are providing 7%-plus tax-equivalent yields, investors don’t need to make a big bet on rates," said Leslie Martin of Cavanal Hill Investment Management. "Buy-and-hold investors are happy to lock in some of the most attractive tax-exempt yields we’ve seen in years." Miguel Laranjeiro of Aberdeen Investments also touted the buying opportunity in US state and local debt.