With geopolitical tensions approaching the four-week mark, municipal bonds are drawing investor interest amid uncertainty rippling through global markets, analysts say.

Disruptions to oil flows have rattled energy markets and heightened economic uncertainty. However, municipal bonds – rooted in domestic infrastructure and essential services – have remained largely insulated from the turmoil.

“Munis have no fear,” a Thornburg Investment Management portfolio manager told The Bond Buyer.

Yields on municipals have risen relative to Treasuries – though not as dramatically as last year, when tariffs spiked – but the traditional role of munis as a balm for jittery nerves is fueling demand, the manager said.

‘Safe haven’

“Possibly the fact that munis are a safe haven, domestic market providing essential services, maybe this will start entering into the conversation, and we’ll see even more people going into munis.”

Further, credit outlooks look stable, Goldman Sachs noted.

“Although some of the higher-profile state and city budgets show modest deficits, we view these as manageable and not indicative of material credit risk,” the firm said in a report earlier this month. “Both California and Illinois forecast revenue growth moderating to 1%–2%. Both states’ proposals have constrained expenditure growth that helps limit overall deficits.”

Municipal fundamentals remain strong, supported by elevated tax collections, while the pace of upgrades relative to downgrades has continued to moderate, Franklin Templeton noted.

The latest reports are consistent with what we’ve seen so far since the conflict broke out (“Munis Amid Global Tensions”): Municipals continue to show resilience, supported by steady investor demand and solid fundamentals.

More issuance expands opportunity

A boon for investors has been increased inventory. Issuance this year has risen approximately 7%, according to Bloomberg.

Greater issuance expands the range of available bonds across states and issuers. Increased availability, along with historically attractive yields, also helps investors lock in income without sacrificing credit quality.

Further, the yield curve is steepening. Recently, for example, the tax-equivalent yield of 30-year, A-rated bonds was a whopping 8.56% for investors at the 40.8% tax rate.

Of course, while events continue to evolve, the outlook could change.

But what we’re seeing now is increased supply, steady credit strength and highly appealing long-term yields – a market offering investors ample opportunity to lock in tax-advantaged income and keep their interest clock ticking.