The Long View Lyle Fitterer: The State of the Municipal Bond Market Today
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Dec 16, 2025 Lyle Fitterer, a seasoned senior portfolio manager at Baird Advisors with over 36 years in the municipal bond market, shares invaluable insights. He delves into Baird's innovative credit scoring system and usage of AI for enhancing credit analysis. Lyle clarifies the muni-to-Treasury ratio's significance and discusses current municipal valuations, highlighting attractive investment areas. He also compares indexing versus active management strategies and identifies pitfalls in municipal credits, while providing a reassuring view on the future of muni tax exemptions.
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Inefficiency Creates Active Edge
- The muni market is large but highly inefficient, creating active management opportunities.
- Baird uses tech and a credit-scoring system to narrow 5,000 obligors to ~400 watch names for focused research.
Use AI To Speed Credit Work
- Use AI to summarize offering statements and covenants to speed credit comparisons across deals.
- Let junior team members prototype AI workflows and scale the best ideas firmwide.
Use M/T Ratios To Judge Value
- Use the muni-to-treasury (M/T) ratio to decide tax‑adjusted attractiveness and curve positioning.
- Compare your marginal tax rate to the ratio and prefer munis when tax-adjusted yields exceed taxable alternatives.