Municipal Fixed Income Commentary 1Q2009

The municipal market continued to provide positive returns across the curve as investors flocked to municipal bonds. Municipal new issuance was nearly on pace with first quarter 2008 at $83.8 billion, just 1.9% behind. Unlike the 4th quarter of 2008, lower rated credits such as Baa and A rated bonds outperformed higher quality sectors. The Barclays Baa index produced a quarterly return of 7.22% while the Aaa index posted a 3.52% return. Municipal investors were enticed by the higher yields offered by the A/Baa sector as they were trading at spreads wider than the long-term averages.