The iShares National Muni Bond ETF from BlackRock, managing $46 billion, saw inflows of approximately $1.2 billion last week. Simultaneously, the $47 billion Vanguard Tax Exempt Bond ETF attracted roughly $1.7 billion, marking the largest weekly inflows for both funds on record.
These movements follow a selloff in the municipal bond market that drove yields to multiyear peaks. Benchmark 30-year muni yields hit 4.89% earlier this month, marking their highest point since 2011. Meanwhile, 10-year yields reached their highest level since April 2025.
Rising yields have increased the appeal of municipal debt, especially for investors seeking federal tax exemptions. Vanguard noted that these conditions have improved the relative value of municipal bonds and their tax-equivalent income potential, despite the broader market remaining under pressure.
Market activity is also influenced by tax-loss harvesting, where investors sell individual bond positions to move into broad ETFs while keeping market exposure. Additionally, municipal bond issuance in the second quarter reached $182 billion, representing a 33% increase from the first quarter.
