Municipal Market Update | February 2024
The municipal bond market saw yields jump up slightly as February came to an end. Moves upward were consistent across all parts of the curve.
While historically January and February tend to be lower in new issuance, we have seen the biggest year-to-date supply since 2007.
Major Municipal Bond Index Returns (%)
Municipal & Tax Equivalent Yields
Yields across the curve experienced a slight upward move but yields on high grade (HG) municipals rose by less than Treasuries for the month. 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 HG 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 indicates a steeper municipal curve compared to Treasuries.