US municipal bonds are experiencing their worst monthly performance since 2023, creating opportunities for tax-exempt investors. The market decline has lowered bond prices enough to attract buyers who see value in the downturn. Municipal debt has become more affordable as yields rise, prompting some investors to increase their holdings.

This shift comes after months of market volatility and changing interest rate expectations. The selloff has particularly affected longer-duration bonds, which are more sensitive to rate changes. Investors who hold municipal bonds for their tax advantages are now finding better entry points after prices fell.

The renewed interest suggests some market participants believe the worst of the selloff may be over. As bond prices adjust, the increased demand could help stabilize the market. This dynamic is typical in fixed-income markets where higher yields eventually attract buyers.