In the 2Q 2018 issue of our quarterly publication, we:
- Provide a round-up of yields across the muni spectrum, noting that 2Q offset 1Q and brings 2018 municipal bond markets back to even… for now.
- Offer our outlook for 3Q, framing it in terms of our core narrative.
- Explore the pros and cons of investing in New Jersey’s state and local tax-exempt bonds.
U.S. Treasury interest rates trended higher over the first half of 2018, the tax-exempt municipal bond market followed suit and spent the entire first half underwater. But if the first three months of 2018 were decidedly negative, the second three months were a mirror image producing an almost identical positive offset. As of March 31, the S&P Municipal Bond Index finished 1Q with a –0.923% return, with two of the three months falling in negative territory. Then in 2Q, as if to rewind the film, investors cobbled together two months of positive returns to print a +0.910% trailing three-month performance.
Despite the most recent counterpoising months—and most impressively, the S&P Municipal Bond Index’s +1.132% showing in May—the recovery was insufficient to bring year-to-date returns into the black. In point of, that same broad market benchmark printed a practically flat –0.021% return for the first six months of 2018. Interestingly, while three of the first six months of the year generated negative returns, the rolling trailing 1-year performance remained positive and was never in jeopardy of slipping under water. As of this writing investors continue to follow through with a constructive sentiment, and the S&P Municipal Bond Index sports a +0.441% total return. To close, it is apparent that domestic fixed income markets are captivated by global macro trends. The latest sociopolitical upheavals in Spain and Italy, the potential for a severe trade war with China, and President Trump’s meeting with Soviet President Vladimir Putin are but a few examples of pivotal events that can move market sentiment without so much as the slightest warning. All of that is to say that we are finally a bit more than back to even… for now.
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