In the 4Q 2018 issue of our quarterly publication, we:

  • Provide a round-up of yields across the muni spectrum and an overview of yield curves, performance, and fund flows.
  • Offer our outlook for 1Q19, framing it in terms of our core narrative.
  • Explore the Affordable Care Act’s likely return trip to the U.S. Supreme Court and how it could impact credit risks within the health care sector.

The past year was one of shifting sentiment oscillating between risk on and risk off, and it was decidedly so for domestic fixed income markets. In order to put the most recent quarter into perspective, we think it may be instructive to add historical context. Throughout the first nine months of 2018, robust global growth and concerns over consequent accelerating inflation—and the belief that the Fed would continue to insistently raise its short-term rate target—drove benchmark interest rates and index yields higher as bond market returns suffered. The S&P Municipal Bond Index ended 2017 drawing a 2.353% yield, and by April 2018 it was sporting 2.798%, a 45 basis point, or bps (0.45%) upswing. In fact, that broad market index delivered negative returns in three of the first four months of the year.

While May and June produced consecutive performances of +1.132 and +0.126%, it was insufficient to bring the index’s year-to-date total return to dry land. With the close of 1H2018, the S&P Municipal Bond Index’s trailing 6-month performance stood at –0.021%.

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