Global investing

"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.

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.

Barclays' Mikhail Foux talks shifting demand, BABs refundings, election effects and what it means for the asset class in a volatile market.

Investor demands and lower account minimums have grown separately managed accounts across fixed-income markets, particularly in munis. Russell Feldman, CEO and co-founder of IMTC, discusses this evolution and how technology has contributed to changing market dynamics.

Some participants on the Street estimate that SMAs hold as much as $1.5 trillion of munis while others peg it closer to $1 trillion to $1.3 trillion.

The inflows into muni mutual funds mark a reversal from 2022 and 2023.

"We're in a market right now where there's heightened volatility in prices, inconsistent pace of supply, and for investors who need to put money to work, muni ETFs continued to play that role," CreditSights' Pat Luby said.

Household and U.S. bank ownership of individual bonds fell and the total face amount of munis outstanding was down 0.6% quarter-over-quarter and down 1.4% year-over-year, Fed data shows.

Retail investors may be moving out of municipal bond mutual funds and into separately managed accounts, largely due to the headline shock of the massive outflows from the funds, participants say.

Largely attributable to Fed interest rate increase-led volatility, outstanding municipal bonds lost $300 billion of market value in the first quart of 2022, a Municipal Securities Rulemaking Board report said.

For investors who want a customized portfolio and a greater ability to control taxable events, SMAs may be the product they're searching for.

The platform allows advisors to tailor portfolios that have characteristics including state-specific credits, ESG considerations, duration targets and other criteria.

The 2017 Tax Cuts and Jobs Act continues to influence the composition of the municipal bond market.

Federal Reserve data show the effects of a new tax code that makes muni ownership less appealing for banks.

The municipal market appears to be shifting away from its traditional retail-dominated status, which has implications for regulatory policy that's largely aimed at protecting the retail investor.

Ronald Schwartz of Seix Investment Advisors resolves to upgrade credit, keep duration neutral to shorter, and remain selective about investments.