MuniBond October Update...Long-Term Value Shines

MuniBond Monthly Market Update:

October delivered a robust 1.24% gain in MuniLand and through October 31^st, the Bloomberg Municipal Bond Index has posted YTD gains at a solid 3.91%.

What really stood out? Long-maturity bonds continued to outperform compared to the short end. Take the Bloomberg 20-Year Index: +2.18% for the month, versus -0.14% for the 3-Year Index. Zoom out further—since August 29, the 20-Year is up an eye-popping 6.15%, while the 3-Year is basically treading water (see Display 1).

Credit-wise, it's been pretty even across the board. MTD, the Bloomberg AAA Muni Index is up 1.22%, edging out the BBB's 1.30%. YTD, AAA leads at 3.88% to BBB's 3.65%. High yield? It's quirky as ever, but still positive at +0.98% MTD and +2.29% YTD.

Bottom line: The long end of the muni curve still screams value and upside potential, even after that August 29 rally kicked in.

Why it matters:

Long munis still looks downright attractive right now. With the curve so steep if there is more curve flattening ahead—that means outperformance for the long end over shorts

For folks invested in cash/money markets, those yields are sliding into the high 3%-to-low 4% zone—after-tax, that's a measly 2.25%-2.75%. Time to think duration. We are locking down 4.00%, even 4.50% tax exempt yields to a 10-year call.

The Tax-Equivalent Yield for a 4.50% is almost 8% in most states, north of 9% in the highest tax states.

Go long… think big... don’t overthink it…lock in 8% TEYs.