U.S. Risky Muni Bonds Beat High-Yield Debt Around the Globe

It’s paying off to bet on risk in America.

U.S. municipal-junk bonds are outperforming high-yield debt around the world as well as their overall tax-free counterparts at home, according to Bloomberg Barclays indexes. Year to date, securities issued by the riskiest corner of the municipal-bond market are posting a 7.27% return, well above the 3.87% showing for U.S. corporate high-yield debt and 3.75% for European debt.

Investors are chasing those returns as high-yield muni funds have raked in cash for 20 straight weeks, the longest such stretch since 2019, Refinitiv Lipper US Fund Flows data show.

Federal aid has eased ...