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.