Municipal Market Update | May 2024
The municipal bond market saw another increase in yields over the month of May. Front-end yields only saw a small increase of about ~4bps, while the Bloomberg 5 Year and 1-15 Year Municipal Indices saw a much more dramatic increase, ~27bps and ~21bps, respectively. The Taxable Index also saw an increase of about 16bps.
On a month-to-month basis, yields have gone higher each month in the year 2024.
Major Municipal Bond Index Returns (%)
Municipal & Tax Equivalent Yields (%)
Treasuries for the month saw a rally to lower yields in the month of May. Muni A & AA Revenue bonds saw close to a 30bp widening in the belly (3-10yr) of the curve. 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 still appealing.
Municipal/Treasury Ratios (%)
The wider spreads between the below data points indicate a steeper municipal curve compared to Treasuries.
Source: All data from Bloomberg as of 5/31/24.
A basis point is a standard measure for interest rates and other percentages in finance. This update provides an overview of certain broad-based Fixed Income benchmarks and does not include performance of the Segall Bryant & Hamill Fixed Income styles. Past performance cannot guarantee future results. All investments involve risk, including the possible loss of capital. An investor cannot invest directly in an index. All opinions expressed in this material are solely the opinions of Segall Bryant & Hamill. You should not treat any opinion expressed as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of the manager’s opinions. The opinions expressed are based upon information the manager considers reliable, but completeness or accuracy is not warranted, and it should not be relied upon as such. Market conditions are subject to change at any time, and no forecast can be guaranteed. Any and all information perceived from this material does not constitute financial, legal, tax or other professional advice and is not intended as a substitute for consultation with a qualified professional. The manager’s statements and opinions are subject to change without notice, and Segall Bryant & Hamill is not under any obligation to update or correct any information provided in this material.