UBS On-Air: Market Moves Top of the Morning: Muni Market: Steadier, steeper, and cheaper
Jun 17, 2025
In this discussion, Sudip Mukherjee, Senior Fixed Income Strategist at UBS, shares insights on the municipal bond market's steady performance amidst macro uncertainties. He highlights attractive yields and the impact of inflation and policy changes on investment strategies. The conversation also touches on the challenges local governments face with funding cuts and federal policy shifts, while emphasizing the resilience of municipal bonds. Listeners gain valuable perspectives on credit selection and the positive outlook for the market.
AI Snips
Chapters
Transcript
Episode notes
Muni Bonds Steady With High Yields
- Municipal bonds have held steady despite volatility, benefiting from strong demand and inflows.
- Yields are near 15-year highs, attractive compared to investment-grade corporates on a tax equivalent basis.
Steeper and Cheaper Muni Curve
- The municipal yield curve has steepened significantly, especially for long maturities.
- Munis have also cheapened relative to treasuries, enhancing long-term value.
Barbell Strategy for Muni Investments
- Favor a barbell strategy with short and intermediate maturities to balance risk.
- Avoid heavy concentration in longer maturities due to elevated short-term rate and policy risks.