Muni Bond Market Hits Two-Decade Low in July as Treasury Yields Rise

The US municipal bond market is experiencing its weakest July performance since 2003. Normally, July is one of the strongest periods for state and local government debt as coupon payments and maturing bonds put cash back into investors' hands. However, this year's heavy wave of new issuance competing for investor dollars has created a supply-demand imbalance.

Rising benchmark Treasury yields are making existing municipal bonds less attractive, causing their prices to fall. This means that when Treasury yields rise, municipal yields have to follow suit to stay competitive. With the federal government issuing vast quantities of Treasury bonds and running large deficits, it sets the risk-free rate for every other bond in the market.

New Hampshire's proposed $100 million Bitcoin-backed municipal bond was rejected by the state executive council on July 9, 2026. Although a majority voted to reject it, two votes would have sent this innovative bond into the market. The rejection highlights concerns about Bitcoin's price volatility and its impact on collateral value.