At Icon Wealth Partners, we believe there are opportunities in the tax-free municipal bond market when two key factors align:
- Interest rates are high enough to make long-term investing worthwhile, and
- Muni bond yields offer a strong advantage compared to Treasuries and corporate bonds
In the current Muni bond environment, we have observed both factors in place, presenting one of the most attractive entry points we’ve seen since 2022.
What does this mean for investors?
Over time, the relative advantage of tax-free Munis over taxable bonds fluctuates due to the high supply of new issues and underlying market demand for Muni bond funds and ETFs.
The chart below compares the 10-year US Treasury yield (orange) and the Taxable Equivalent Yield on 10-year Texas AA Munis (blue) assuming a 40.8% marginal tax rate. The bottom panel shows the spread (additional yield) an investor receives from Munis over US treasuries (~2%).
As of April 7th, 2025, we’ve seen some of the highest spread levels since the Fed rate hike cycle began in 2022 and are about 2 standard deviations cheap to the 4-year average.
As of 5/5/2025, for illustrative purposes only.
What’s driving the opportunities in the Muni market?
- Despite recession fears and the Federal Reserve cutting interest rates by 100bps in 2024, interest rates have moved substantially higher since the end of 2024
- Fears that of tax reform in Congress putting a cap on the amount of interest that can be designated as tax-free for investors muni bond portfolios (an outcome we view as unlikely)
- Market volatility driving severe supply / demand imbalances in the muni ETF and mutual fund space
Fixed Income at Icon Wealth Partners
Icon Wealth Partners has the scale to negotiate pricing on large bond blocks and allocate efficiently across client portfolios. Our relationships with over 50 broker-dealers give us access to new municipal bond issues and over $1 billion in tax-free inventory, allowing us to identify opportunities that align with each client's income, liquidity, and tax objectives.
To further discuss the opportunities in the muni market and the role municipal bonds can play in your portfolios, please reach out to info@iconwp.com or your respective advisor.
Important Disclosures
This blog post is for informational purposes only and should not be relied upon as investment advice. This material is intended only to facilitate your discussion with Icon Wealth Partners, LLC (“Icon”) as to the opportunities available to our clients and is not intended to be used as a general guide to investing, or as a source of any specific recommendation, and makes no implied or expressed recommendations concerning the manner in which clients’ accounts should or would be handled, as appropriate strategies depend on the client’s specific objectives.
The information contained herein is superseded by, and is qualified in its entirety by, such offering materials. This material is based upon information which we consider to be reliable, but we do not represent that such information is accurate or complete, and it should not be relied upon as such. Any historical information is as of the date stated. Any statements regarding future events constitute only subjective views or beliefs, are not guarantees or projections of performance, should not be relied on, are subject to change due to a variety of factors, including fluctuating market conditions, and involve inherent risks and uncertainties, both general and specific, many of which cannot be predicted or quantified and are beyond our control. Past performance is not indicative of future returns. Future results could differ materially and no assurance is given that these statements are now or will prove to be accurate or complete in any way.
Charts are for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. You should consider a fund's investment objectives, risks, charges, and expenses carefully before investing.
Do not rely on any opinions, predictions, projections or forward-looking statements contained herein. Certain information contained in this document constitutes “forward-looking statements” that are inherently unreliable and actual events or results may differ materially from those reflected or contemplated herein. Icon does not make any assurance as to the accuracy of those predictions or forward-looking statements. Icon expressly disclaims any obligation or undertaking to update or revise any such forward-looking statements. The views and opinions expressed herein are those of Icon as of the date hereof and are subject to change based on prevailing market and economic conditions and will not be updated or supplemented.
EXTERNAL SOURCES. Certain information contained herein has been obtained from third-party sources. Although Icon believes the information from such sources to be reliable, Icon makes no representation as to its accuracy or completeness.
