3rd Quarter 2016 Municipal Market Performance and Highlights
- Municipal market returns turned slightly negative for the first time in more than a year and underperformed U.S. Treasuries during the third quarter as rates drifted upward. For the three months ended September 30, 2016, the Bloomberg Barclays Municipal Bond Index generated a total return of -0.30% compared to the Bloomberg Barclays U.S. Treasury Index return of -0.28%. Municipal performance was still solidly positive on a year-to-date basis, however. For the nine months ended September 30, 2016, the Bloomberg Barclays Municipal Bond Index returned 4.01% and the Bloomberg Barclays Non-Investment Grade Municipal Bond Index returned 9.37%.
- New issue supply increased during the quarter. For the three months ended September 30, 2016, new issue volume topped $112 billion to bring the nine month total to $336.7 billion—approximately 5.7% higher than the pace set during the same period in 2015 after lagging it during the first half of 2016.
- Retail demand continued to be robust despite slowing in September. A net $15.9 billion flowed into municipal funds during the quarter, marking 52 consecutive weeks of positive net inflows and bringing the year-to-date total through September 30, 2016 to $49.5 billion--more than 11.5 times the amount reported for the first nine months of 2015.
- Credit fundamentals remained healthy as first time defaults continued to trend lower, setting the stage for at least a fifth consecutive year of stable or positive default trends.
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