Vanguard’s Paul Malloy predicts municipal bond yields will bolster market performance in the second half of 2026, driven by attractive tax-equivalent returns and a constructive economic environment.
The article explicitly discusses improving muni yields and a bullish second-half outlook for municipal bonds, directly impacting the iShares National Muni Bond ETF (MUB). Malloy's call points to higher total returns as yields attract buyers and rate volatility subsides.
Elevated yields support higher income and potential price appreciation as demand grows. MUB would likely see positive total returns in the second half, especially if rate volatility eases.
A rapid backup in Treasury yields could reduce muni attractiveness, while a recession-driven spike in municipal defaults would hurt the asset class and MUB's net asset value.
According to Vanguard's Malloy, the outlook favors entering now to capture high tax-equivalent yields ahead of an expected second-half rally. Investors should weigh credit and rate risks against the yield advantage.
Vanguard's municipal bond expert Paul Malloy sees current muni yields supporting a positive outlook for the second half of 2026. Attractive tax-equivalent levels are drawing investors, and an improving macroeconomic backdrop should contain defaults. The call favors munis outperforming as rate volatility eases and demand strengthens.
Vanguard's Paul Malloy projects a strong second half, with elevated yields bolstering returns. Demand is expected to pick up as tax-equivalent yields remain attractive and the economic backdrop stays supportive.
Current muni yields offer high tax-equivalent returns relative to other fixed-income assets, making them especially appealing for investors in higher tax brackets. The yields reflect a premium that compensates for credit and liquidity risks.
Paul Malloy is Vanguard's head of municipal bond investing, providing strategic insights on the muni market. His views are closely followed by fixed-income investors.