Municipal Market Update | March 2024
The municipal bond market saw a leap up in front-end yields, while seeing a less drastic move higher in the long end. Front-end yields increased over 20 basis points (bps), while the Bloomberg 1-15 Year Municipal Index saw closer to a 10 bp increase.
On a month-to-month basis, yields have crept higher each month following the record rally at the end of 2023.
Major Municipal Bond Index Returns (%)
Municipal & Tax Equivalent Yields (%)
Treasuries and AA munis saw an increase in yields across the board. Single A front-end munis saw the most dramatic move up; however, long-end single A munis saw a slight move lower. Value continues to persist in short maturities and past 10-year calls.
While the municipals/Treasury yield ratios remain challenging, we continue to see value in high grade municipals, particularly versus longer duration corporate bonds.
Yield Curve (%)
The ongoing yield curve inversion from 3 to 10 years, as seen below, suggests that a barbell strategy centered around 1 to 2 year and 12+ year maturities is increasingly appealing.
Municipal/Treasury Ratios (%)
The wider spreads between the below data points indicate a steeper municipal curve compared to Treasuries.