Municipal bonds have had a difficult year, with investors fleeing the market as interest rates rise. Experts believe that rising yields and strong credit are causing a shift.
According to Refinitiv Lipper data, while investors poured a record-breaking $96.8 billion of net money into U.S. muni mutual and exchange-traded funds in 2021, weekly inflows have been negative for the majority of 2022.
According to Tom Kozlik, head of municipal research and analytics at HilltopSecurities, last week’s data were still negative, but outflows slowed dramatically, showing increased interest.
According to Kozlik, one of the causes could be a greater so-called municipal-Treasury ratio, which compares muni bonds to almost risk-free Treasury returns. Municipal bonds become more appealing as the proportion rises.
He said, “I’m not suggesting we’re going to see a complete turnaround in the next week or two.” “However, we will see pockets of increased demand throughout the summer.”
Because many muni bonds are due to mature in June and July, he anticipates investors to reinvest their funds in these assets, resulting in positive inflows.