ZROZ - Muni bonds wrap up worst quarter in nearly 40 years amid hawkish Fed: Bloomberg

Municipal bonds have finished the worst quarter since the early 1980s, as investors discount the Federal Reserve's aggressive rate hike policy. Note that muni bonds are issued by states, local governments, or countries to finance its capital expenditures on projects such as highways or schools. Specifically, muni bonds ended Q1 with a 6.4% loss, the biggest drawdown since 1981 at -9.7%, according to data from Bloomberg. The muni bond rout has cut $108B of market value from Bloomberg's muni index since the start of 2022 in a backdrop of continued outflows from mutual funds, Bloomberg noted. “It’s finally sinking in -- investors now believe that rates are going higher,” Chris Johns, a managing director at Davidson Fixed Income Management told Bloomberg. Retail investors have an "itchier trigger finger" when they expect interest rates to rise, especially off the effective zero lower bound, he added. Looking at the chart below, muni bonds (MUB)

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Muni bonds wrap up worst quarter in nearly 40 years amid hawkish Fed: Bloomberg