The S&P Municipal Bond Investment Grade Index returned 3.595% in October, as sharply lower municipal yields drove strong price appreciation across the market and largely reversed September’s losses, though year-to-date returns remained modestly negative.
Other Highlights
- Rates and Curve Dynamics: Municipal yields moved sharply lower in October, while the yield curve steepened slightly as longer maturities experienced smaller yield declines than the rest of the curve.
- Credit Names with Spread Moves: New York State Housing Finance Agency Affordable Housing Revenue Bonds, Connecticut Housing Finance Authority, and New York City Housing Development Corporation Multifamily Housing Revenue Bonds saw notable spread tightening, while Los Angeles International Airport, the State of Illinois, and the State of Washington experienced meaningful spread widening
- Sector and Spread: Housing-related sectors had the lowest change in spread, while Tobacco Settlement and IDR/PCR sectors experienced spread widening.
- State Performance: Texas, Minnesota, Florida, and Virginia led state returns, while Alabama and Georgia lagged due in part to their higher exposure to the underperforming IDR/PCR sector.
- Monthly Spot Curve: The ICE U.S. Municipal AAA Noncallable spot curve decreased approximately 64 basis points at the ten-year maturity, reflecting substantial downward pressure on municipal rates during the month (see figure).
October’s performance highlights how quickly market conditions can shift, as sharply lower municipal yields drove a broad-based rebound and strong returns across the municipal bond market.
Read the full report for an in-depth understanding of the contributions to the month’s performance.
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