Archive for the ‘Municipal Market Letter’ Category

Wild Swing

April 6th, 2026 by Kurt L. Smith

Over the past couple of months, this letter has focused on potential changes that may be developing in the markets. Periods of low volatility can sometimes be followed by increased volatility, and there are indications that broader trends maybe evolving. Recent movements in financial asset prices have drawn greater attention from investors, highlighting the importance of staying informed and evaluating portfolio positioning.

While some stock indices have declined approximately ten percent, my primary focus remains on bonds. Bond prices experienced significant declines in prior years, with long-term US treasury bellwether bonds declining over fifty percent from 2020 to 2023. Since then, a subsequent period of correction (higher prices and lower yields) appeared to support expectations among some market participants that interest rates might trend toward lower over time, although the outlook remains uncertain.

Whoops! Bonds are declining in price right along with other financial assets. In this environment, bonds have not consistently provided the level of diversification some investors expect, and in certain periods have lagged equity performance. These developments have prompted investors to reassess the role of fixed income within a diversified portfolio. and begging some to ask the question “Why do we own bonds?”

Yet this is the question investors continue to fail to ask. Rather than ask the hard question, there can be a tendency for investors to hold on to the optimism that many on Wall Street are there to sell them: bonds will recover and they should be ready for the double digit gains that longer duration may offer them.

In our view, the band wagoning days of bonds have been over for years. The new trend is set and investors betting against the trend will, in my opinion, become poorer for the experience.

Earlier this year, some municipal bond investors thought perhaps staying with shorter terms might be the thing to do. As the demand for these securities increased, it highlighted how pricing in the municipal bond market can become dislocated under strong buying pressure. It is the new issue market where portfolio managers attempt to fill their orders. For example. Bloomberg’s data showed the two-year AAA Municipal Bond curve hit approximately 2% at the end of February, while the five-year curve hit 2.07%. And if those rates were not silly enough, new deals in high demand states with lots of billionaires, like California, saw yields priced well below the curve: a Pasadena AA+ refunding deal on March 5 was priced roughly 34 basis points below the curve for two years and 30 basis points below for five years.

One challenge in the municipal bond market is the market does not scale. If you need to invest a few billion you are at the whim of the primary new issue market to meet allocation needs. This is not unusual across portfolio managers, as periods of strong demand can influence pricing and availability in new issues. As a result, performance outcomes among municipal bond strategies may at times appear similar, reflecting shared exposure to these market conditions.

Interest rates moved higher during the period, making March 2026 the worst for municipal bond performance since September 2023. The two-year and five-year scales above each jumped fifty basis points before the month ended; perhaps Pasadena bond buyers fared even worse. In the municipal bond market, thinking you are doing the right thing is not easy to execute. That is because municipal bonds do not scale; you cannot turn small into large without consequences. Investors may feel silly now but not as silly as looking at greater losses on the longer bonds in their portfolio. At least they got their bonds!

Buying shorter term bonds with yields below 2% is unlikely to generate significantly higher returns in the current environment. Choosing shorter term bonds reflects a cautious view regarding expectations for future interest rates. While we share the view that interest rates may remain elevated, The Select Approach^TM employs strategies designed to seek more favorable risk-adjusted outcomes, emphasizing the potential for income generation at the time of purchase. Unlike certain other financial assets, where returns are largely realized when you sell, fixed income investments can generate value immediately through their yield. While that is not the case in decades long bull markets, it is the case once the trend changes.

The end of the bond market correction in the first quarter of this year presents challenges for municipal bond investors who believe scaling works to achieve desired outcomes. Weakening financial asset prices, particularly bonds, can devastate performance numbers. The favorable bond market correction (for performance) is now back to the unfavorable trend. Wall Street’s cheerleading of lower interest rates in the future led to investors doubling down on longer-term bonds in the hopes of recovering the losses of 2020 through 2023. It is better to sell hope than to admit that the trend has changed. Besides, it is not Wall Street’s money, it is yours. You deserve better and you have the opportunity to do better when you work with us.

Austin TX Water & Wastewater Revenue Refunding and Improvement Bonds Series 2026

Aa2 Moody AA S&P AA- Fitch (All Underlying)

Due 11/15 Dated 4/21/26 Maturity 11/15/55

$540,445,000 Sold

Years Maturity Coupon Yield*

1 2027 5.00% 2.50%

2 2028 5.00% 2.58%

3 2029 5.00% 2.66%

4 2030 5.00% 2.76%

5 2031 5.00% 2.89%

6 2032 5.00% 3.04%

7 2033 5.00% 3.11%

8 2034 5.00% 3.21%

9 2035 5.00% 3.33%

10 2036 5.00% 3.42%

11 2037** 5.00% 3.55%

12 2038** 5.00% 3.67%

13 2039** 5.00% 3.78%

14 2040** 5.00% 3.81%

15 2041** 5.00% 3.88%

16 2042** 5.00% 3.95%

17 2043** 5.00% 4.04%

18 2044** 5.00% 4.16%

19 2045** 5.00% 4.25%

20 2046** 5.00% 4.34%

21 2047** 5.00% 4.49%

22 2048** 5.00% 4.58%

23 2049** 5.00% 4.63%

25 2051** 5.00% 4.66%

29 2055** 5.25% 4.70%

29 2055** 5.00% 4.75%

*Yield to Worst (Call or Maturity) **Callable 5/15/36

Source: Bloomberg

This is an example of a new issue priced the week of 3/23/26. Provided for illustrative purposes only and is not a recommendation to buy or sell any specific investment.

Illustrative examples may not reflect actual transactions, investor results, or available investment opportunities.

This commentary is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal. Prices, yields and availability subject to change. Investment return and principal value of fixed income securities may fluctuate, and bond prices are subject to interest rate risk, credit risk, and liquidity risk. Index data is provided for illustrative purposes only.

Early Stages

March 10th, 2026 by Kurt L. Smith

Last month I asked, “How About a Little Volatility?” Bonds, which reach one of their lowest volatility levels in over four years on January 26th, experienced a noticeable increase. It was the largest rise in bond market volatility since the beginning of spring last year.

Why does rising volatility matter? In my experience, periods of increased volatility can sometimes create additional opportunities in the municipal bond market. One way to think about it is similar to shaking a pecan tree; more shaking can sometimes produce more.

Another potential sign of change may be developing in the two-year US treasury note. After trading near historically low yields of approximately 0.10% on February 11, 2021, five years ago, the two-year yield peaked at 5.25% on October 19, 2023. Since then, yields declined (prices increased) for a period of more than two years, reaching 3.36% on March 2nd before moving back up to 3.63% this week.

Viewed over a longer time horizon, the trend of the two-year notes increased from approximately 0.10% to 5.25% before experiencing a multi-year pullback to around 3.36%. If so, this could portend higher short-term interest rates for the future as the trend reasserts itself and yields move to newer highs.

The two-year tax-exempt municipal yield has shown a broadly similar look to the two-year treasury note, going from approximately .03% on August 4, 2021, to 3.75% about two years later October 23, 2023. The index was 2.00% two years later on September 17, 2025, and 2.01% last week before rising with treasury yields to approximately 2.14%.

Comparatively, the 2.14% tax-exempt yield represents roughly 60% of the 3.55% on the two-year US treasury note. Depending on an investor’s tax bracket, time horizon, and investment objectives, one could wonder who finds 2.14% tax free for two years attractive. I sure do not, but demand from investors for municipal securities has generally remained steady, keeping spreads on municipal bonds tight compared to treasury yields.

We continue to find many worthwhile municipals compared to new issues (below) as well as the indices, yet we are cautious, and hopeful, that yields rise across the board from here. Setting the trend, correcting the trend, with both taking two years or so, appears to look complete. Yields on treasury notes and bonds as well as municipal bonds should move higher from here.

Higher yields can create headwinds for municipal bond mutual funds as well as managed products, particularly those that have benefited recently by adding duration by buying longer term bonds. As we have talked about these past couple of years, bond portfolio performance has been lousy since the end of the bond bull market in 2020, though the correction of the past two years has made recent returns somewhat tolerable. Mutual fund and managed fund performance could change dramatically if, as I expect, interest rates are now beginning their climb towards new higher yield territory.

The world is full of risks and investors have largely enjoyed the ability to ignore them. After setting the trend towards lower bond prices and higher yields, I believe the bond market is now poised to set new lows in price as yields work towards new highs.

Recent New Issue Example

Sheldon Independent School District Bonds

Series 2026

Aa3 Underlying Moody Aaa PSF Guaranteed

Due 2/15 Dated 4/1/26 Maturity 2/15/54

$58,815,000 Sold

Years Maturity Coupon Yield*

1 2027 7.00% 2.32%

2 2028 7.00% 2.33%

3 2029 7.00% 2.37%

4 2030 7.00% 2.40%

5 2031 7.00% 2.45%

6 2032 7.00% 2.53%

7 2033 7.00% 2.62%

8 2034 5.00% 2.69%

9 2035** 5.00% 2.79%

10 2036** 5.00% 2.88%

11 2037** 5.00% 3.00%

12 2038** 5.00% 3.13%

13 2039** 5.00% 3.25%

14 2040** 5.00% 3.34%

15 2041** 5.00% 3.44%

16 2042** 5.00% 3.57%

17 2043** 5.00% 3.72%

18 2044** 5.00% 3.87%

19 2045** 5.00% 4.03%

20 2046** 5.00% 4.18%

21 2047** 5.00% 4.27%

22 2048** 5.00% 4.33%

23 2049** 5.00% 4.36%

26 2052** 5.00% 4.44%

30 2056** 4.50% 4.50%

*Yield to Worst (Call or Maturity) **Callable 2/15/34

Source: Bloomberg

This is an example of a new issue priced the week of 3/2/26. Provided for illustrative purposes only and is not a recommendation to buy or sell any specific investment.

This commentary is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. The views expressed are those of the author as of the date of publication and are subject to change without notice. Market conditions and economic developments may cause actual results to differ materially from those discussed. Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal. Prices, yields and availability subject to change. Investment return and principal value of fixed income securities may fluctuate, and bond prices are subject to interest rate risk, credit risk, and liquidity risk. Index data is provided for illustrative purposes only.

How About a Little Volatility?

February 6th, 2026 by Kurt L. Smith

How About a Little Volatility?

At least with Groundhog Day, you know things are expected to change either sooner or later. Not so with markets. Solid demand for municipal bonds continues to keep that market moving forward along with stock market indices. We know what follows a low volatility period in markets: high(er) volatility. We just do not know when the change will happen.

In the metals market, the “when” came last week as silver plunged forty percent over a two-day period while gold “only” lost twenty percent. For those of you looking for alternatives out there, this is how markets work. Some happen quickly like the above metals, while Bitcoin and Oil have lost forty percent over a longer time frames with Bitcoin peaking in October 2025 and Oil in March 2022. All these markets have a way to go to catch our bellwether U.S. Treasury Bond, the 1.25% of May 15, 2050, which is back to trading below fifty cents on the dollar compared to the slight premium it traded at shortly after its issue in 2020.

Trends happen. Trends have been established in Bonds, though we know many argue that this is a buying opportunity. I am sure many continue to say the same about the markets discussed above. Things are beginning to happen, albeit slowly, particularly in the U.S. treasury bond market. Today, February 2^nd, the ten-year U.S. Treasury note closed at a 4.28% yield. This is the highest close since late August (save 4.29% on January 20^th). Why is this significant? The Federal Reserve cut its benchmark interest rate three times since late August, on September 17^th, October 29^th, and December 10^th, yet the ten-year note has failed to follow, reversing course after hitting 3.93% on October 17^th.

Expectations for further rate cuts by the Federal Reserve continue to be priced into the treasury yield curve. This is to say short term yields on treasury securities are low (3.5% to 3.8%, approximately) while longer term yields are rising now 4.25% to over 4.90%). But expectations are just that and they are subject to change, sometimes by a lot and sometimes quickly.

You have been lucky enough to live through one of the greatest asset price booms of all time. Owners of long-term bonds know, or should know, after almost six years since peaking that the price boom of Bonds is over, though investment professionals somehow continue to convince investors they should continue to own bonds. Hope appears to be their plan, and like expectations, hope can shrivel.

After huge moves in asset prices, Cash becomes king. Managing Cash through the tax-exempt, as well as taxable, municipal bond market is what we have been doing for our clients for many decades. We provide our clients with stability; your monthly statement is a testament to that. We continue to find select municipal bonds that we believe to be worthwhile in this market as well as for the trends that are established.

Copperas Cove Independent School District Bonds

Series 2026

AA- Underlying S&P AAA PSF Guaranteed

Due 2/15 Dated 2/1/26 Maturity 8/15/54

$79,110,000 Sold

Years Maturity Coupon Yield*

1 2027 5.00% 2.26%

2 2028 5.00% 2.26%

3 2029 5.00% 2.50%

4 2030 5.00% 2.50%

5 2031 5.00% 2.36%

6 2032 5.00% 2.44%

7 2033 5.00% 2.53%

8 2034 5.00% 2.59%

9 2035 5.00% 2.69%

10 2036 5.00% 2.77%

11 2037** 5.00% 2.91%

12 2038** 5.00% 3.07%

13 2039** 5.00% 3.19%

14 2040** 5.00% 3.31%

15 2041** 5.00% 3.47%

16 2042** 5.00% 3.60%

17 2043** 4.00% 4.00%

18 2044** 4.00% 4.10%

19 2045** 4.00% 4.15%

20 2046** 4.00% 4.23%

21 2047** 4.125% 4.31%

22 2048** 4.25% 4.37%

25 2051** 4.25% 4.48%

28 2054** 4.375% 4.52%

*Yield to Worst (Call or Maturity) **Callable 2/15/36

Source: Bloomberg

This is an example of a new issue priced the week of 1/26/26. Provided for illustrative purposes only and is not a recommendation to buy or sell any specific investment.

Exuberant Optimism

January 9th, 2026 by Kurt L. Smith

The financial markets continue to reflect a high level of optimism. Stocks had good performance in 2025 and developments in artificial intelligence is on fire. There is so much optimism in financial markets that it even bleeds into the bond markets.

Many investors seem to be content with their portfolio and very few seem to be making, or willing to make, a meaningful change in their portfolio mix. The one message that seems to resonate with me is this: stay the course.

This is the message that a lack of pain delivers. Bumps in the road have been merely that; bumps in the road. The last umpteen years have been a financial planner’s dream. As a result, many long-term financial plans remain on track. However, it is important to review portfolio components individually rather than relying solely on overall results.

This is not what bond performance figures tell us. When examined independently, bond performance has been more modest compared to stocks. Looking at the municipal bond market, the Bloomberg Municipal Bond Index reports the following compounded returns: 4.25% for one year, 2.63% for two years, 3.87% for three years, 0.80% for five years, and 2.34% for ten years. Index performance does not reflect the deduction of fees, expenses, or taxes, and investors cannot invest directly in an index. Actual investor results may vary, particularly in separately managed accounts (SMAs) or mutual funds where expenses apply.

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Interest Rate Cut Coming Wednesday

December 9th, 2025 by Kurt L. Smith

Short term U.S. Treasury yields continue to fall paving the way for another twenty-five basis point interest rate cut by the Federal Reserve at this week’s December 10 meeting. the six-month treasury bill fell from 5.59% August 29, 2023, to a new low of 3.68% last week, taking money market yields lower as well.

In a report issued by Crane Data on December 3, money market mutual fund assets recently broke the $8 trillion level for the first time, up from $6 trillion in August 2023 and $4 trillion in 2020, the COVID year. Cash may not be king, but these levels dwarf the $4 trillion-plus municipal bond market.

Obviously, investors of cash are willing to accept less returns as rates on short term securities and money market mutual funds have decreased since the Federal Reserve began cutting interest rates from 5.50% in September 2024 to perhaps 3.75% Wednesday. But unlike their long-term bond brethren, lower rates on money markets do not equate to higher prices and better performance. Lower rates on money markets merely gets you less: lower yields earn you less return.

This explains why longer-term bonds continue to be a high buzz asset class. Best to lock in these higher yields on longer bonds before they too shrivel like money market yields. We have only one month left in 2025 and if longer term interest rates can just hold in there, then purveyors of bonds will have 2025 performance figures to hawk further into 2026.

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Far From A Foregone Conclusion

October 31st, 2025 by Kurt L. Smith

Federal Reserve Chairman Jerome Powell opened his remarks following the October 29^th quarter point interest rate cut saying: “A further reduction in the policy rate at the December (10^th) meeting is not a foregone conclusion, far from it.” I am not a Fed watcher, but I applaud a statement that at least appears to be forceful.

Mr. Powell may be frustrated in my opinion. The Federal Reserve has cut the target interest rate 150 basis points, from 5.50% in September 2024 to this week’s 4%. What does the Federal Reserve have to show for it? When your mandate is to keep inflation low and employment high, I think the Federal Reserve should be frustrated, particularly when your declared inflation goal is 2% and we have not sniffed that level in years.

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Something Is Changing

October 8th, 2025 by Kurt L. Smith

You are not reading this letter for advice on the stock market or crypto so obviously that is not what I am talking about with respect to change. The change I am talking about, of course, is regarding interest rates. On September 17, 2025, the Federal Reserve reduced the federal funds rate by 25 basis points cut on September 17^th as anticipated. Odds are currently high for another 25 basis point cut on October 29^th (94.6% odds of cut per Bloomberg as of October 7, 2025).

We have talked about short-term cash yields and how the trend there has been lower. But the low yields for the past six months occurred on or about September 17^th. On the short-term side, six-month US treasury bills bottomed at 3.75% on September 16^th and are basically flat since, hence the continued high odds for another rate cut at the end of this month.

Yields on longer term US treasury ten-year notes hit their six-month low on September 17^th, and just as I told you last month, yields have bounced higher since. This is early stage, but so far, the ten-year yield has done everything a change in trend needs. Look for higher yields on the ten-year note throughout year end and beyond.

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The End of a Move?

September 8th, 2025 by Kurt L. Smith

Sideways market movements can often seem perplexing. Just when you think interest rates should move one way, they meander the other; seemingly for months on end.

Welcome to the summer of 2025. Four months of longer-term U.S. Treasury yields ending little changed. The volatility of April saw interest rates plunge, then jump to even higher rates in May. Here we are at the end of unofficial summer after Labor Day with interest rates working their way back down to…normal?

This is how the bond markets act like a market. Several steps forward, one back. We have been here before: from the interest rate highs of October 2023 to a low in September 2024 I wrote often about the frustrations of a market in a correction.

The part of the bond market I care most about is the longer bonds. On this day before the monthly employment numbers are released (yes, by the Bureau of Labor Statistics), the thirty-year bellwether treasury trades at 4.88% (all prices and yields per Bloomberg). This yield is 94% of the 5.18% high back on October 23, 2023, and is much higher than 3.89% correction low on September 17, 2024. The trend for long term interest rates remains higher as I have said since March 2020 and the long end of the market is the place to see that most clearly.

Short-term interest rates, indicated by the six-month treasury bill, show a different picture. Today’s 3.96% yield sits on top of the spike low of 3.92% on April 7, 2025, during the height of April’s volatility and is down substantially from the 5.59% high of August 29, 2023. This summer’s plunge of yield on the six-month treasury bill puts the odds of a Federal Reserve rate cut of 25 basis points on September 17th at 95%, again per Bloomberg.

The Federal Reserve is a follower in my book, a follower of the six-month bill. Usually, employment data confirms the recent direction of interest rates so it would not surprise me if short term yields continued lower and the Federal Reserve comes through on September 17th with this first rate cut since December 18, 2024.

Unfortunately, it is those with cash in money market funds and other short-term instruments like treasury bills that have seen the effects of lower yields. These are generally not the moves you want to see as a holder of cash: a diminishing of your income.

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Municipal Performance Lags

August 4th, 2025 by Kurt L. Smith

What else is new? According to Bloomberg the municipal bond market is “logging its worst performance relative to US government debt since the start of the pandemic.” Municipals have lost 1% so far this year, trailing the 3% gain on US treasuries by about four percentage points.

Municipal bond pundits love to talk about supply and demand in the new issue market. but over the long term, we believe that supply and demand should even out. As we have talked about for years, performance is determined not by owning the market, but by selecting your municipals with performance in mind.

We are in a bear market for bonds, and this means you have the wind in your face instead of at your back. Rising interest rates subtract from performance. Prior to the end of the bull market, falling interest rates gave a capital gain performance boost to portfolios. This trend change, in March 2020, makes performance figures in bonds look quite puny ever since.

For example, as of August 1, 2025, Vanguard Long-Term Tax-Exempt Fund Admiral Shares (VWLUX) reported total returns of -1.77%, +1.63%, and +0.18% for the one-, three-, and five-year periods, respectively (Source: Bloomberg). You can pick your favorite municipal bond vehicle and it, unfortunately, will probably look fairly similar.

Similarity in the municipal market appears to be the rule in our four trillion-dollar market. Yes, managing assets is a matter of scale, as it appears most of the participants hold similar bonds. How else can I describe similar performance figures?

Owning the market has its advantages, particularly in a bull market. Owning seven stocks has its advantages as well, if they are THE seven stocks and the market continues as a bull. But owning the market in municipal bonds may not serve you as well as selecting your municipal bonds may serve you. Look at your statement over the past one-, three- and five-year periods or even longer.

In my opinion, the bear market for bonds is not complete. The asset gathering of Wall Street firms continues in municipals and watch any of their commercials; they are not selling the idea of buying in a bear market. Hard to fathom a bond market where our bellwether bond, the US Treasury 1.25% 5/15/2050 traded at over 100 in 2020 and consistently in the 50s or below for almost three years now, is worthwhile. Somebody, or something, owns that bond and hopefully it is not you. Have municipal bonds fared better than that bellwether? Perhaps, but who wants them; it is an indictment on owning long-term bonds in a bear market.

There are much better ways to keep your money safe and earn a worthwhile return at the same time. Individual municipal bonds are the key in a bond bear market. Individual bonds have maturity dates, unlike the mutual funds and exchange traded funds that are marketed however they are marketed. A maturity date is key; it was key to avoiding 5/15/2050 (then and now).

Since April 2025’s dramatic sell-off in bonds, interest rates have been trading in a range. How long this will continue, I do not know. But I do believe the trend is for higher interest rates despite seemingly everyone else continuing to invest in the municipal market, and its pathetic performance returns, hoping for better. The trend is not their friend, but it is ours.

Let me show you how The Select Approach^TM could work for you. For example, the Georgetown ISD bonds (below) is indicative of the general market. Look at those yields, below 3%, even before Friday’s rally (8/1/2025). We have options for short-term tax-exempt bonds; I suggest you consider them. We continue to find worthwhile bonds and I look forward to hearing from you.

Georgetown Independent School District, Texas

Unlimited Tax School Building and Refunding Bonds, Series 2025

Aa2 Moody Underlying AA Underlying S&P

Aaa Moody and AAA S&P on Permanent School Fund Guarantee

Due 2/15 Dated 8/26/25 Maturity 2/15/55

$334,005,000 Sold

Years Maturity Coupon Yield*

1 2026 5.00% 2.52%

2 2027 5.00% 2.54%

3 2028 5.00% 2.57%

4 2029 5.00% 2.61%

5 2030 5.00% 2.75%

6 2031 5.00% 2.97%

7 2032 5.00% 3.10%

8 2033 5.00% 3.27%

9 2034 5.00% 3.38%

10 2035 5.00% 3.57%

11 2036** 5.50% 3.71%

12 2037** 5.50% 3.89%

13 2038** 5.50% 4.00%

14 2039** 5.00% 4.20%

15 2040** 5.00% 4.31%

16 2041** 5.00% 4.40%

17 2042** 5.00% 4.52%

18 2043** 5.00% 4.64%

19 2044** 5.00% 4.69%

20 2045** 5.00% 4.73%

21 2046** 5.25% 4.76%

22 2047** 5.25% 4.81%

23 2048** 5.25% 4.84%

24 2049** 5.25% 4.87%

25 2050** 5.25% 4.87%

30 2055** 5.25% 4.90%

*Yield to Worst (Call or Maturity) **Callable 2/15/35

Source: Bloomberg

This is an example of a new issue priced the week of 7/28/25. Provided for illustrative purposes only and is not a recommendation to buy or sell any specific investment.

Prices, yields and availability subject to change. Investment return and principal value of fixed income securities may fluctuate, and bond prices are subject to interest rate risk, credit risk, and liquidity risk.

Optimism Continues

July 1st, 2025 by Kurt L. Smith

The year is half over, and I hope you have enjoyed every minute of it. Financially speaking, the markets have not done much of anything, which has aligns well with our investment strategy. You continued to earn worthwhile tax-free returns and we’ve identified several new opportunities over the past six months.

As we close out the first half of the year, both equities and fixed income show signs of strength. Stocks have bounced up nicely, while bond prices have only edged slightly higher over the past six weeks, resulting in slightly lower yields. For example, look at the Katy ISD bonds below compared to last month’s Fort Bend County Toll Road. Last month there were no maturities below 3%; this month the first six years are below 3%. Longer term yields move relatively little (not much optimism out there), so perhaps more bond investors have turned skittish and prefer short-term over long-term, or they are just more optimistic on short-term bonds.

Meanwhile, stocks continue to perform in their own world, with bonds seemingly benefitting slightly from their buoyancy. Such optimism and bounce up in stock prices should make the first half performance figures look strong. If we could weather the storm that was back in April, just think where we can go from here. Isn’t optimism contagious?

You are familiar with this ebb and flow of markets because that is what you are investing in: a market. We know as bondholders that performance does not always move up and to the right. But that is the hope/belief/reality for those investing in stocks. On the other hand, bondholders, particularly those who believed long-term bonds were not a part of a market, have seen their performance struggle for years.

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Archive for the ‘Municipal Market Letter’ Category

Wild Swing

Early Stages

How About a Little Volatility?

Exuberant Optimism

Interest Rate Cut Coming Wednesday

Far From A Foregone Conclusion

Something Is Changing

The End of a Move?

Municipal Performance Lags

Optimism Continues

NEWS FEED