Uncertainty abounded in the municipal bond market in the first quarter of 2015; likewise the same could be said of fixed income as a whole. The year began with market consensus believing rates would rise during the first quarter of 2015 in anticipation of possible Federal Reserve (Fed) tightening mid-year. Instead, weaker than expected U.S. economic news and persistent international concerns weighed on yields, as a flight to safety, attractive U.S. Treasury yields versus other sovereign debt, and sentiment changes regarding Fed timing pulled in the opposite direction and created pronounced rate movements in both directions.
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