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Muni yields were virtually unchanged in January, continuing their outperformance of U.S. Treasuries, which sold off by up to 20 basis points (bps) on the long end of the curve, as Muni-to-Treasury ratios fell to all-time lows. Low supply combined with continued inflows into muni mutual funds have caused a renewed imbalance in the market. As a result, credit spreads have continued to narrow, leading to an underpricing of credit risk. We continue to focus on high grade credits as underlying economic risks still exist and rates remain at historic lows, leading to limited upside potential.