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Quarterly municipal bond outlook: Municipal bonds: technical tailwinds and positive credit momentum
Municipal bond market performance improved during the first quarter, as yields declined in the face of capital market turmoil surrounding the banking sector. Low new issue supply and positive fund flows contributed to performance. Following a strong fourth quarter, municipals have positive momentum while offering an attractive entry point to investors.
KEY TAKEAWAYS
- Municipal bonds produced positive performance in the first quarter, despite continued volatility in U.S. Treasury rates and banking turmoil.
- While the pace of issuance is likely to pick up, it is expected to be relatively muted compared to levels over the past five years.
- Nearly all states are in a strong fiscal position, due to state revenue growth outpacing budget forecasts and unprecedented federal pandemic aid.
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