Positive momentum in municipal bond funds continues into 2022

Municipal bond funds experienced their second-largest quarterly return on record in Q4 2021, indicating positive momentum heading into 2022. While yields have increased compared to pre-COVID levels, the muni bond market still offers attractive yields relative to other segments. Transportation and toll roads are highlighted as promising areas for investment due to increased travel and strong revenue streams. However, investors should be cautious and conduct credit analysis as not all states and credits are created equal. Active management and understanding the underlying credits are crucial for success in the fragmented muni market.