Municipals rallied significantly in May, with AAA yields moving lower or remaining unchanged in every trading day of the month. The opportunity to invest in munis that we pointed out in last month’s report was also recognized by the broader market, causing munis to return to more “fair value” levels compared to other fixed income assets. As over $3 billion in cash returned to muni funds, short-term yields fell to historic lows and the overall market posted one of its best monthly performance numbers in over 10 years. We expect muni yields to remain at these depressed levels in the near term due to the combination of continued cash inflows and negative net supply figures leading to a flood of cash chasing a limited amount of paper.