Investment strategies

Loren McDougall will help Birch Creek launch high-yield-focused separately managed accounts.

Separately managed accounts have exploded in the muni market in recent years but high-yield SMAs remain rare.

The slowdown of growth in the fourth quarter does not imply there is dwindling demand for munis, said Pat Luby, head of municipal strategy at CreditSights.

Investors like the 10-year area of the curve because "if they're buying duration, the tax-exempt market is usually going to be one of the best places to buy," said Wesly Pate, a senior portfolio manager at Income Research + Management.

Investors added $238.5 million to municipal bond mutual funds in the week ending Wednesday, following $1.124 billion of inflows the prior week, according to LSEG Lipper data.

"Our job is to take that volatility, figure out what's noise, figure out what's reality, and lean into the opportunities as we see them," said Alex Petrone, director of fixed income at Rockefeller Asset Management.

There are eight municipal bond interval funds, three of which launched last year, promising fewer liquidity constraints and the potential for higher returns.

Kim Olsan, senior fixed-income portfolio manager at NewSquare Capital, discusses the municipal market's performance, the impact of rising yields and inflation, and the evolving role of ETFs and separately managed accounts as the market braces for record supply in 2025.

The face amount of munis outstanding rose to $4.171 trillion, a 0.8% increase from Q2 2024 and 2.9% from Q3 2023, according to the latest Fed data.

Principal Street Partners will acquire the bankrupt firm that specialized in high-yield bonds issued for senior living facilities and charter schools.

With supply ballooning, reinvestment dollars at lows of the year, J.P. Morgan's Peter DeGroot argues the next few weeks could offer the best opportunity to buy bonds of the year – and possibly the rate cycle. DeGroot talks about this, plus potential impacts of shifting investor behavior on market liquidity, and what the upcoming election might mean for tax policy and the muni market. Lynne Funk hosts.

Household ownership of individual bonds was the largest category of muni ownership at 44.6%, mutual funds at 19.2%, exchange-traded funds at 3.1% and U.S. banks at 12.4%. While not detailed in the Federal Reserve data, SMAs may hold up to $1.6 trillion currently.

"Investor reception will remain the ultimate arbiter of muni performance and … the current state of the tax-exempt space to be well-positioned, even though munis are likely to continue to underperform USTs," said Jeff Lipton, a research analyst and market strategist.

Broker-dealer Millennium will provide clients with real-time pricing and trade execution capabilities by connecting directly to the Investortools Dealer Network, or IDN.

Household ownership of munis — which includes direct ownership of individual bonds in brokerage accounts, fee-based advisory accounts and SMAs — rose to $1.779 trillion, up 0.3% from Q4 2023 and from 5.6% in Q1 2023.

As the public finance landscape evolves with increased philanthropic interest and a focus on climate resilience and community health, it's time for traditional market participants to align their investments with impactful outcomes to drive systemic change and foster equitable growth.

Despite losses, munis are "being set up nicely" as the summer season approaches, said Jeff Lipton, a research analyst and market strategist.

SMA growth has been "pretty staggering to see," said Matthew Schrager, managing director and co-head of TD Securities Automated Trading, noting the "interplay between SMA and electronic trading is a very symbiotic relationship."

Marty Mannion and Matt Schrager, managing directors and co-heads at TD Securities Automated trading division, discuss how automation and electronic trading are creating more opportunities and better outcomes for municipal market participants, including making muni bonds more accessible to a broader range of investors.

A state ban on bond underwriters that "boycott" or "discriminate" against the fossil fuel or firearms industries has resulted in fewer banks providing municipal financial products and services.