The S&P Municipal Bond Investment Grade Index returned 0.70% in June, as falling municipal yields—particularly at longer maturities—capped off one of the strongest quarterly finishes in recent years despite continued inflation pressures.
Other Highlights
- Rates and Curve Dynamics: Municipal yields declined across much of the curve, with larger decreases at longer maturities generating strong returns from both parallel and non-parallel yield movements
- Credit Spread Moves: New York University bonds saw significant spread tightening, while credits such as Sacramento City and Bonneville Power Administration experienced notable spread widening
- Sector and Spread: Health Care spreads tightened while Housing and Tobacco Settlement sectors experienced the most notable spread widening
- State Performance: South Carolina, New York, and Texas were among the top-performing states, benefiting largely from longer-duration exposure amid falling yields
- Monthly Spot Curve: The ICE U.S. Municipal AAA Noncallable spot curve’s overall level fell about 5 bp (measured at the ten-year point), but the thirty-year point fell an additional 15 bp beyond that (see figure below)
June’s performance demonstrates how falling yields can outweigh inflation concerns, with duration exposure providing a meaningful boost to municipal bond returns as the second quarter came to a close.
Read the full report for an in-depth understanding of the contributions to the month’s performance.
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