For Muni Bond Yields, A “Trump Bump”

Municipal bond investors are benefitting from a post-election surge in yields that presents a rare opportunity to capture excess yield and total return. Since the election, yields on 10-year AAA-rated muni bonds have risen 150% more than have yields on US treasuries during the same time. The rise in muni yields has also outpaced that of many types of corporate bonds over that stretch. To put this in perspective, munis have reached relative yield levels similar to these only three other times during the past ten years.

Standish believes that this is a technically driven dislocation, a combination of record new issue supply and redemptions from open end mutual funds and municipal ETFs. Muni bond fundamentals remain strong and rates have risen along with treasuries. Meanwhile, despite those stable fundamentals, spreads for revenue bonds have widened to levels we have not seen in two years.

Though the market has firmed with buying interest from insurance companies, investment managers and “crossover” investors, muni yields remain compelling, especially considering the favorable quality and long term stability of the asset class.

The comments provided herein are a general market overview and do not constitute investment advice, are not predictive of any future market performance, are not provided as a sales or advertising communication, and do not represent an offer to sell or a solicitation of an offer to buy any security.  Similarly, this information is not intended to provide specific advice, recommendations or projected returns of any particular product of Standish Mellon Asset Management Company LLC (Standish).  These views are current as of the date of this communication and are subject to rapid change as economic and market conditions dictate. Though these views may be informed by information from publicly available sources that we believe to be accurate, we can make no representation as to the accuracy of such sources nor the completeness of such information.  Please contact Standish for current information about our views of the economy and the markets.  Portfolio composition is subject to change, and past performance is no indication of future performance.
BNY Mellon is one of the world’s leading asset management organizations, encompassing BNY Mellon’s affiliated investment management firms, wealth management services and global distribution companies. BNY Mellon is the corporate brand for The Bank of New York Mellon Corporation. Standish is a registered investment adviser and BNY Mellon subsidiary.

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