- A gauge tracking high-yield munis surged 9.2% in 2023
- Supply and demand dynamics supporting such debt remain strong
Money managers don’t anticipate another banner year for high-yield municipals, one of the best-performing sectors of US debt in 2023.
Junk muni bonds posted a 9.2% advance for the full year, the most since 2019. Returns were buoyed by a lack of high-yield supply and a widespread market rally starting in November.
The market could look different this year if the Federal Reserve cuts interest rates and muni issuers rush to borrow. A slowing US economy also doesn’t bode well for a sector that’s largely made up of nursing homes, tobacco bonds and charter schools, said John Flahive, head of fixed income at BNY Mellon Wealth Management.
Bloomberg Markets
By Maxwell Adler and Amanda Albright
January 5, 2024