economy
Investors are snapping up muni funds at fastest pace in 5 years. Why the good times may last
These experts are finding opportunities to grab solid income in the muni market.
TL;DR
- Municipal bonds, free from federal and sometimes state taxes, have rebounded in April after a poor March, showing their strongest April performance since 2014.
- Investor inflows into municipal bond funds have reached their fastest rate since 2021, with $22.3 billion in net inflows in the first four months of the year.
- Experts like Matt Norton (AllianceBernstein) and Sudip Mukherjee (UBS) view current yields as attractive for income generation and predict strong performance over the next 12-18 months due to appealing valuations and improved technicals.
- Barclays advises caution, noting that macroeconomic risks, such as geopolitical tensions, could increase volatility and make conditions more challenging.
- Specific attractive opportunities are identified in longer-term bonds (15-30 years), credits rated A or BBB, and sectors like affordable housing and senior housing due to high occupancy and strong credit fundamentals.
- Other experts recommend focusing on essential service revenue bonds (water, sewer, public power, transportation) and specific parts of the yield curve (17-22 years), noting their outperformance compared to Treasurys and corporates.