FCAL - Trade War Brings April Showers - Municipal March Update
2025-04-17 07:30:00 ET
Summary
- Higher-than-anticipated tariff increases weighed heavily on municipal market sentiment.
- Seasonal supply-and-demand dynamics were further challenged by outflows.
- Most municipals are based upon domestic revenue that is less impacted by tariffs.
By Patrick Haskell, James Schwartz, & Sean Carney
Market overview
Less-favorable seasonal technicals, increased focus on municipal-specific policy risks, and severe volatility spurred by higher-than-anticipated tariff increases weighed heavily on sentiment and resulted in deeply negative total returns and significant underperformance versus Treasuries in March and early April. The S&P Municipal Bond Index returned -1.59% in March and -3.26% through the first nine days in April, bringing the year-to-date total return to -3.49%. Not surprisingly, the front end of the yield curve, AA rated credits, and prerefunded bonds performed best. However, with the recent announcement of a 90-day pause on all reciprocal tariffs except those imposed on China, risk markets have stabilized, and we anticipate a rebound in municipal bonds in the days ahead....
Trade War Brings April Showers - Municipal March Update