UBS On-Air: Market Moves Top of the Morning: Muni Market update - Flows gather momentum
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Oct 22, 2025 Sudip Mukherjee, a Senior Fixed Income Strategist at UBS, dives into the dynamics of the municipal market alongside Jeannine Lennon. They discuss the recent rally in September, highlighting strong inflows and the performance of high-yield munis. Sudip elaborates on how changing flows towards longer maturities are reshaping the muni curve. They also explore sector opportunities, recommending investments in airports and education, while noting that credit quality hasn’t significantly impacted returns this year.
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Rally Masked Year-To-Date Underperformance
- Investment-grade munis rallied in September but still underperform year-to-date, highlighting ongoing opportunities.
- Taxable munis led U.S. fixed income performance due to longer duration and falling Treasury yields.
Easing Cycle Supports Munis
- CIO expects rate cuts in October and December, with another in H1 2026, supporting munis.
- With the 10-year near their year-end target, near-term returns rely more on coupon income than price moves.
Flows Have Gathered Momentum
- Net inflows into investment-grade munis picked up in September, driven by longer maturities.
- ETFs captured roughly two-thirds of year-to-date muni inflows despite being a small market segment.