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  • Jonathan Poyer

The Muni Market Is On a Wild Ride



Let us take a look at an interesting start to 2023 in the Municipal Bond Market. Using the Bloomberg Municipal Bond Index for data, this has been quite the year!


The first quarter of 2023 was a textbook definition of volatility in financial markets. Positive municipal bond returns for the month of January were the strongest January returns dating back to 2009 at 2.87%.

Year (January)

Bloomberg Municipal Bond Index

1986

5.89%

1985

5.77%

2009

3.66%

1984

3.64%

1982

3.64%

1988

3.56%

1987

3.01%

2023

2.87%

February reversed course and was the worst February for the municipal bond market since 2008 at -2.26%.

Year (February)

Bloomberg Municipal Bond Index

1980

-7.82%

2008

-4.58%

1994

-2.59%

1985

-2.49%

2023

-2.26%

March was a positive month in general (2.22%), but it suffered through a banking crisis which created a flight to safety in which Treasury bonds outperformed all other fixed income products.

Year (March)

Bloomberg Municipal Bond Index

2008

2.86%

2023

2.22%

2000

2.19%

While the Federal Reserve may not yet be finished hiking short-term rates, they are close. The previous hikes in short-term rates are starting to trickle into the economy and could speed up the process of moderating both inflation and employment going into the latter part of the year. We believe the combination of the Fed being finished raising rates and a moderating economy should cause interest rates to fall.

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