Muni Update: Technicals Push Tax-Exempt Bonds Lower

2025-04-23 05:49:40 ET

Summary

• Munis underperformed Treasuries due to March tax seasonality, with significant redemptions from corporations and individuals. The unwind of the Treasury basis trade further hurt performance.
• Valuation is very attractive in the sector, with high-quality Munis trading on par with Treasuries at the long-end of the curve.
• We highlight our four-pronged approach for the sector.

The tax-exempt sector has faced a number of technical headwinds over the last few weeks. In this article, we discuss the key factors that have pushed the sector around, such as tax seasonality and fund outflows, supply, the politics of tax exemption. We also discuss our four-pronged approach to the sector, the valuation on offer as well as highlighting opportunities. Our view is that the tax-exempt sector presents one of the best opportunities for investors in this market, particularly for those investors who can take full advantage of the high value of the tax exemption....

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