June update
- Municipal bonds posted positive absolute and relative performance in June.
- Modest primary and secondary supply was outpaced by improved demand.
- While July has historically been a top-performing month, we maintain some near-term caution.
Market Overview
Municipal bonds delivered on expectations for the summer strength and posted positive absolute and relative performance in June. Despite a mid-month pause by the Federal Reserve at the June FOMC meeting, interest rates rose in the front and intermediate part of the yield curve as strong economic data, persistent inflation, and hawkish Fed guidance prompted the market to reprice for a longer tightening cycle. However, improved supply-and-demand technical helped municipals to significantly outperform comparable Treasuries. The S&P Municipal Bond Index returned 0.89%, bringing the year-to-date total return to 2.52%. Longer duration (i.e., more sensitive to interest rate changes) and lower-rated bonds performed best.
advisorperspectives.com
by Peter Hayes, James Schwartz, Sean Carney of BlackRock, 7/13/23