A painful fixed-income selloff is driving benchmark 30-year municipal bond yields above 5%, the highest since at least January 2011. Yields climbed 11 basis points to 5.07% as of 3 p.m. New York time, while 10-year muni bonds rose 14 basis points to 4.01%, according to Bloomberg-compiled data. Inflation fears and expectations for more Federal Reserve interest rate hikes have rattled the muni market, which is facing a 2.8% September loss as of Wednesday, on track for its worst month since 2023.

“Municipal market conditions continue to suggest the beginnings of a negative feedback loop of underperformance begetting outflows and outflows begetting underperformance,” JPMorgan Chase & Co. strategists led by Peter De Groot wrote in a report Thursday. “We expect this will likely persist until the rates backdrop is more settled.”

Despite the selloff, the 5% threshold is attracting some investors. “We have heard from our Street partners that they are seeing some insurance companies, some banks, some other types of crossover buyers coming in,” said Mark Paris, chief investment officer at Invesco. Meanwhile, a gauge of upcoming muni bond supply fell to around $15.9 billion, signaling a potential slowdown in deals. Investment managers put about $3.4 billion of muni bonds up for bid on Wednesday, the most since the pandemic onset in 2020.