State and local government bonds posted their biggest one-day gain in a year following news of a ceasefire between the US and Iran. The relief rally spread across global financial markets as investors welcomed the de-escalation of military tensions. Municipal bonds, often viewed as safe-haven assets, benefited from the shift in sentiment as traders moved away from riskier positions.

The market reaction underscores how geopolitical events can quickly impact fixed-income securities. Municipal bonds had faced pressure earlier in the year amid concerns about rising interest rates and fiscal pressures at state and local levels. The sudden improvement in risk appetite provided a sharp reversal for the sector.

This surge highlights the sensitivity of municipal markets to broader geopolitical developments. Investors appear to be pricing in reduced uncertainty, though the sustainability of the rally will depend on whether the ceasefire holds and if other economic pressures on state and local governments ease.