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BofA Says Worst of Muni Selloff May Be Over as Fed’s Path Clears

  • First quarter likely absorbing most of year’s bearish move
  • Risk removed unless 10-year Treasury yield surpasses 2.5%

Bank of America Corp. says the worst of this year’s selloff in the municipal bond market might already be over, though there may be some additional pain in March after the Federal Reserve’s rate decision. 

With the timing of expected policy tightening at the central bank now shifted to next month, the first quarter should absorb most of the bearish price action, analysts led by Yingchen Li wrote in a note Friday. And the more the Fed lifts rates at its next meeting, the clearer the path of rates will be in 2022, they said.