In the 3Q 2019 issue of our quarterly publication, we discuss the latest developments in the municipal market.

  • Municipal issuance picked up in the third quarter following muted supply the first half of the year; robust demand continued to outpace supply despite the increased issuance.
  • Municipal issuers are increasingly turning to the taxable debt market to refund tax-exempt debt, a result of the Tax Cuts and Jobs Act of 2017.
  • Growing municipal pension liabilities are a frequent topic of concern in the financial press, but a related subject has received less focus—growing fixed costs.

Municipal performance remained strong in the third quarter despite softer technical indicators. The S&P Municipal Bond Index returned 1.56% for 3Q19 compared to 2.12% for 2Q19. This reflects positive returns in the first two months of the quarter, while September generated a negative total return of -0.65%, the first negative return since October 2018. The broad market index, containing bonds across all maturities, returned 6.57% through 3Q, well exceeding the 2018 full year return of 1.36%.

Please see important disclosures at the end of the commentary.

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