Biggest Monthly MuniBond Really since 1986

MuniBonds rallied 4.6% in November, biggest monthly advance since 1986, the year "Stand by Me" was released.
Investors pounced on the highest yields we have seen in 18 years in muniland.
Do not fret or let this rally slow your resolve. 
We continue to secure juicy tax exempt yield with TAX EQUIVALENT YIELDS (TEY) over 7%.
Please reach out immediately if you want to start/add to your daily accrual interest clock.

Munis Trounce Treasuries by Most Since 2020

By Jennah Haque and Martin Z. Braun

Municipal bonds are staging their biggest rally in decades, easing the pain of this year’s dismal performance and outpacing Treasuries by the most since early in the pandemic.

US state and city debt has gained 4.6% in November, on track for the biggest monthly advance since 1986, Bloomberg index data show. What’s more, they’ve trounced Treasuries, which have gained 2.1%, for the greatest outperformance since May 2020.

As an explanation for the fierce muni advance, market watchers cite a combination of ebbing bond issuance and resurging investor appetite for tax-exempt debt as rates have stabilized near the highest levels in years. There’s even the prospect that the momentum could build, should investors step back from selling slumping holdings for tax purposes.

“Demand has already started improving for municipals, which is reflected in the strong performance in November,” said Daniel Solender, head of municipals at Lord Abbett & Co. “But it has the potential to get better as the rate outlook stabilizes and as tax-loss selling slows as we near year-end.”

Munis are still down about 9% this year, for the worst annual performance since 1981. But they’re joining the rest of fixed income in rallying this month as inflation has shown signs of easing, possibly giving the Federal Reserve room to slow its interest-rate hikes.

To be sure, munis are now getting a little pricey compared with Treasuries. In fact, they’re the costliest since January using one widely watched measure of relative value.

But investor interest is growing, and Vikram Rai, head of Citigroup Inc.’s municipal-bond strategy group, says the market’s supply-demand imbalance may persist for months.

November saw the first weekly inflow to muni-bond mutual funds since August. And in the last week, investors have plowed almost $730 million combined into the two-biggest municipal bond exchange-traded funds -- BlackRock Inc.’s iShares National Muni Bond ETF (MUB) and the Vanguard Group Inc. Tax-Exempt Bond Index ETF (VTEB).

“It seems like there’s insatiable appetite for munis,” said Lyle Fitterer, co-head of municipal investments at Robert W. Baird & Co.

While rates have been falling lately, investors can still buy intermediate to longer-term debt rated A or higher with yields of 3.5% to 4%, which equates to 6% to 6.5% tax-adjusted for buyers in higher tax brackets, Fitterer said. And with worries over a potential recession lingering, there’s added incentive for investors to lock in higher rates, he said.

“This reset in yields has brought focus back to fixed income and enabled an attractive entry point, which has historically preceded positive returns in the asset class,” said Sylvia Yeh, co-head of municipal fixed income at Goldman Sachs Asset Management.


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