Home Stretch: Two Great Months to Close Strong
Home Stretch: Two Great Months Left to Close Strong
The municipal bond market just surpassed last year’s all-time high supply mark and we still have 2 months left! Issuance YTD is 520B and over 8,200 deals have come to market. This week brings another 13-14 billion, opportunities and deals will remain through year-end for disciplined investors -we’ll be running thru the tape!
We believe the credit environment for municipals requires scrutiny and differentiation the market has yet to embrace. We strongly favor high quality ratings and sectors, such as unlimited tax general obligation bonds and dedicated essential service revenue bonds (sales tax, utilities, transportation, and select State housing programs). Get ahead of the herd mentality.
The Fed and the Big Picture
Last week’s 25-basis-point rate cut by the Federal Reserve was expected but a December cut is now uncertain, as Chairman Powell said “not so fast” to market expectations. We expect attractive short duration cash enhanced tax-free yields thru year-end as a result. The Fed Funds futures market is currently pointing to a 3% funds rate by end of 2026.
Positioning & Outlook
Even after the recent rally, municipal value still exists in select parts of the yield curve. Longer intermediate maturities with proper structure (coupons/calls) as well as the forementioned short duration space offer compelling tax-free yields.
Munis Matter
Why do municipal bonds continue to stand out as a core holding for income-focused, tax-sensitive investors? They offer:
Attractive tax-adjusted yields (5% up front and 6.5-7% longer int taxable equivalents)
Robust credit quality, albeit in an increasingly challenging environment.
Yield curve opportunities, very key!! Do not waste duration in parts of curve with little value
Portfolio stability, generous tax-free income, and a balance to appreciated risk assets
Total return opportunities, the market remains inefficient and an active relative value strategy offers great potential
Riverbend Capital
As a boutique muni specialist, Riverbend Capital utilizes the entire high quality market to help clients achieve their investment objectives in the municipal market through customized portfolio solutions. We work hard every day to identify value, manage risk, take advantage of market opportunities, and deliver a high-quality muni experience for our investors.
Let’s have a conversation.