Forward returns from current levels have historically been strong. Value in single-A tax-exempts. State tax receipts.

This week's relatively quiet economic data calendar was largely upbeat, headlined by the strongest PMI reading since July 2021. HG muni yields closed the week higher by 45-41-30-18bp in 2-5-10-30yrs, with 10yr and 30yr AAA yields reaching their highest levels since 2008 and 2011. The sell-off tracked decades-high UST rates, and record BWICs, tax-loss selling, nascent fund outflows and unfavorable technicals contributed to a sixth consecutive week of underperformance, with munis seemingly caught in the early stages of a negative feedback loop. Still, taxable-equivalent yields at multi-decade highs should pull income-oriented capital back into the asset class as rate volatility subsides, and current levels have historically been an attractive entry point, with 30 years of data pointing to average 1-3yr forward returns of 5.7-5.9% annualized and a 7.0% average forward 12-month total return when the 30yr HG yield exceeded 4.5%. A-rated tax-exempts screen 2.7-3.6 sigma cheap to corporates.