Product Categories: Municipal Fixed Income

Municipal Fixed Income Investment Strategy — July 2023

July 11, 2023 — Municipal Fixed Income Investment Strategy provides an overview of Sage’s market outlook and sector positioning.

Market Outlook

  • The municipal credit environment continues to improve and currently exhibits multiple fundamental metrics that have not been this strong in over two decades. Post-Covid challenges related to inflationary pressure have permanently increased the cost of labor, goods, and services that will increase pressure on budgets over time. In addition, long-term challenges such as underfunded pension and OPEB funds will likely result in credit downgrades for those issues that continue to neglect those obligations.
  • Looking forward to the second half of the year, municipal returns are anticipated to be positive, despite some initial yield volatility, delivering 1.5% to 2.0% returns on income alone. Higher-beta credits will continue to outperform as the additional spread will improve both income and provide further price appreciation. With the Fed tightening cycle concluding soon, Sage will continue to add duration in longer-dated maturities since valuations are compelling in that area.

Sage Advice Quarterly Market Review 2Q23

July 10, 2023 — Heading into the back half of 2023, the prevailing narrative seems to be that we are slowing down but only gradually, which makes a soft landing possible but also keeps central banks hawkish for longer. This has allowed risk assets to run and has created some complacency toward macro headwinds in our view. We see a much more challenged back half as stimulus money runs dry and economies feel the increasing impact of restrictive monetary policy and tightening credit conditions. From an economic perspective, this should translate into a mild recession in 2024 in the US with some downside global risk.

Municipal Market Updates – the Good, the Bad & the Ugly

May 15, 2023 — Sage’s outlook continues to be positive for the municipal market, both from a credit quality standpoint and an economic cycle perspective. The following are updates from the municipal market for March and April.

Headline Risk Creates Opportunity for Muni Investors

May 15, 2023 — The municipal sector that has by far received the most controversial press coverage over the last 12 months is the healthcare sector. Included in the following insights are 5 misconceptions about the municipal healthcare sector and why prepaid gas bonds present good value now.

Municipal Fixed Income 1Q23 Market Review & Outlook

April 2023 — The following two-page report recaps the municipal bond market in Q1, provides our outlook for economic growth and monetary policy, and explains how Sage is positioned in the current environment.

National v. State-Specific Strategies: An Alternative Path to Maximum After-Tax Income

March 22, 2023 — When it comes to owning tax-exempt municipal bonds, the most significant benefit is the avoidance of federal income taxes on the income component. For some investors, it also makes sense to avoid state income taxes, especially for those states with the highest tax brackets, such as California and New York. For investors in these states, it can be advantageous to invest in a state-specific municipal strategy to garner the maximum tax efficiency. Unfortunately, the municipal market is quite efficient when it comes to valuations for securities issued by states with high income taxes. If anything, the securities issued by these states tend to trade at richer valuations over time due to their perceived constant demand. So, what is a comparable alternative?

Strong Fundamentals Prevail for Munis

March 13, 2023 — Despite sticky inflation and rapidly rising interest rates, municipalities continue to exhibit strong credit quality. Record tax collections, billions of dollars of government stimulus, and strong budget oversight have helped to bolster state reserve funds to their highest levels ever.

Municipal Transportation Is Back . . . For Some Sectors

January 31, 2023 — The transportation sector makes up about 16% of the municipal bond index, and it was the hardest hit by Covid-19 in terms of operating revenue declines. In our latest Muni Minute, Sage looks at New York City’s Metropolitan Transportation Authority (MTA), the largest mass transit provider in the country, and Dallas Area Rapid Transit (DART), and explains how revenue composition is the primary factor that distinguishes weak and strong muni credits.