Key Themes

  • The S&P Main Municipal Index generated a total return of –3.02% in the second quarter, bringing the year-to-date return to -8.39% and marking the index’s worst performance in the first half of a calendar year since its inception in 1999.
  • Like the first quarter, rising interest rates were a major performance driver across tax-exempt and taxable fixed income markets. The municipal yield curve steepened as yields climbed faster at the intermediate and long end of the curve, while short-term yields also increased.
  • The municipal yield curve flattened as yields climbed faster at the short end of the curve, while intermediate to long-term yields also increased. 
  • Municipals outperformed U.S. Treasuries (USTs) on a maturity-matched basis, causing Municipal-to-Treasury (MT) ratios to richen during the quarter.
  • Our expectation for a stable fundamental backdrop for municipal finances, in combination with improvement in yields and valuations from recent extremes, leaves us more constructive on the long-term performance prospects of the asset class.

For an in-depth look
Municipal Market Quarterly Review