It seems to me that this is a mistake, because, as I said in the comments, even
plot(zoo(101:110,1:10),xlab=bquote(mu~'='~.(mu_val)))
works. I think you should report this to the zoopackage maintainer
The only way to make it work: title
plot(zoo(101:110,1:10),ylab="")
title(ylab = bquote(mu~'='~.(mu_val)))

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