Municipal Fixed Income Investment Strategy

October 10, 2023 — In this presentation, Sage answers the 4 big questions (outlook for macroeconomic growth, Fed policy, valuations, and investor sentiment) and illustrates our municipal fixed income positioning in the current environment.

Market Outlook

• The third quarter was the epitome of a double-edged sword: above-average negative returns coincided with yield levels that reached extremely attractive levels.
• With the significant rise in yields, shorter-dated maturities outperformed. The Bloomberg Municipal Bond Index returned -3.95%, while the Bloomberg 1-10Y Blend Intermediate Index returned -2.23%.
• Credit fundamentals for municipal issuers continue to be solid, and liquidity ratios are sitting at their highest levels on record, providing a significant cushion if revenue streams begin to falter. However, lingering challenges could put some pressure on smaller or more rural issuers that lack robust or diversified revenue sources.
• As a result of the recent moves, the municipal market provides an excellent entry point for new investment, as well as for investors looking to de-risk from other higher-beta asset classes.