January 12, 2024 — 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

• Yield levels, although off their recent highs, still represent an attractive entry point, especially if the economy continues to slow and Fed policy becomes more dovish. The municipal market provides a well-supported backdrop as credit quality remains stable and tax-exempt yield carry remains attractive.
• The coming shift to lower rates will drive price returns positive and benefit longer duration strategies the most. Credit challenges will inevitably develop; however, the initial phase of the slowdown will be relegated to the higher-beta/lower-rated municipal sectors.
• Sage’s barbell allocation will benefit when the inverted 2s5s curve experiences a bull-steepening. We remain committed to our strategic overweight to single A credits, and as we progress through 2024, we will gradually shift some of our higher-beta/lower-credit quality sectors and credits into lower-beta/higher credit quality as economic challenges become more pronounced. Finally, Sage will continue to tactically leverage volatility events, as they represent some of the most attractive entry points.

 

January 11, 2024 — This presentation provides an overview of our market outlook and key themes, and it illustrates how Sage is positioned in the current environment.

Key Themes

• Technical Factors Should Remain Supportive — There are $95.4 billion in maturity and coupon payments expected in the first quarter with limited new issue supply.
• Credit Strength vs. Uncertain Rate Risk — Municipal issuers are well positioned to weather any economic slowdown, but rate volatility will be elevated as Treasury yields react to rapidly changing market factors.
• “De Minimis” Tax Effects — The little-known pricing/tax risk regarding municipal bonds has caused performance volatility and altered return expectations.

The investment objective of this strategy is to minimize downside risk in any environment and maintain consistent quarterly after-tax total returns over an intermediate to long term investment horizon.

The investment objective of this strategy is to minimize downside risk in any environment and maintain consistent quarterly after-tax total returns over an intermediate investment horizon.

The investment objective of this strategy is to minimize downside risk in any environment and maintain consistent quarterly after-tax total returns over a short to intermediate term investment horizon.

December 11, 2023 — This presentation provides an overview of our market outlook and key themes, and it illustrates how Sage is positioned in the current environment.

Key Themes

• Seasonal Effects Remain Strong — Favorable technical factors provide a supportive market for municipals over the next several months.
• Credit Strength vs. Rate Risk — Municipal issuers are well positioned to weather any economic slowdown, but rate volatility will be elevated as Treasury yields react to rapidly changing market factors.
• “De Minimis” Tax Effects — The little-known pricing/tax risk regarding municipal bonds that trade below par and specifically affect sub-5% coupon bonds.

October 17, 2023 — This presentation provides an overview of our market outlook and key themes, and it illustrates how Sage is positioned in the current environment.

Key Themes

• Waiting on the Lag — Tighter monetary conditions and fading stimulus will hurt growth and challenge the soft-landing narrative in the coming months.
• Credit Risk vs. Rate Risk — A challenging economic outlook, yield cushion against any further hikes, and unfavorable valuations in risk assets make rate risk the less worrisome risk.
• Liquidity Drought — Issuance and QT will keep the bias toward shrinking liquidity after the market has ridden the wave of excess liquidity for years.

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.