July 14, 2021 — By the end of the second quarter, the municipal market fully recovered from 2020 Covid-19 lows and has now reached record levels in several areas. Both fiscal and monetary support, along with a consumer-driven rebound, contributed to a robust economic environment that drove asset prices higher across the board. Municipals outperformed most other fixed income asset classes, and muni high yield took top billing, leading to historically rich valuations.

April 14, 2021 — For the first quarter of 2021, the municipal market experienced another sell-off, but instead of economic panic, it was due to an economic boom and record fiscal support that increased inflation expectations. Since municipal valuations remain at or through fair value, Sage has focused on maximum tax-free income, solid credit fundamentals, and favorable risk-adjusted returns.

Despite the dire predictions of massive municipal budget deficits in 2020, only a few areas of the municipal market experienced fiscal challenges that required additional federal support. With the economic recovery in full swing, income tax, sales tax, corporate tax, and ad-valorem property tax have stabilized and continue to improve. Sage remains focused on maximum tax-free income, solid credit fundamentals, and favorable risk-adjusted returns.

The tone of the municipal market did a 180-degree turn in the third quarter, as yield and spread volatility trended lower and seasonal demand, once again, provided firm support. The ongoing and pressing economic concerns related to the Covid-19 shutdown remain ever present; however, investors’ desire for income generation seemingly outweighs any potential credit concerns. During these volatile and uncertain times, Sage remains focused on maximum risk-adjusted income, stable principle valuations, and a high degree of liquidity. Current market conditions warrant patience and prudence when deploying funds as valuations are not broadly reflective of the ongoing fiscal challenges.

Market conditions warrant patience and prudence when deploying funds as valuations are not broadly reflective of the ongoing fiscal challenges. Sage’s long-duration tilt has gradually been reduced and will be rebalanced when swap opportunities become available. Sage maintains a bullet tilt to our curve structure, due to the steep yield curve and the Fed’s ongoing support of front-end yields. Strong seasonal influences and modest new issue supply will provide a supportive backdrop to current yield and spread levels. With a higher probability of industry-wide downgrades over the coming year, sector allocation and rebalancing will remain focused on stable-to-improving sectors, including both general obligation and essential service revenue bonds rated A2 and higher. During these volatile and uncertain times, Sage remains focused on principal preservation, improving liquidity, and stable tax-free income generation.