March 19, 2021
While markets can be unpredictable, trends can help provide insight into potential cyclical opportunities. Historically within the municipal market, we've seen three distinct periods of seasonal trends that typically occur in March, June, and October. During these periods, municipals tend to underperform due to unfavorable supply-demand technicals. The positive performance seen in June 2020 was driven by heavy reinvestment cash into the municipal market, which turned the average monthly return slightly positive.
Bloomberg Barclays Municipal Bond Index
Average monthly returns (%) over a 20-year period (2001-2020)
Source: Bloomberg, Barclays Live, as prepared by Delaware Funds by Macquarie.
The performance quoted represents past performance and does not guarantee future results.
Chart is for illustrative purposes only.
What this means for investors
These seasonal periods of negative average monthly returns position municipal fixed income as a potentially attractive buying opportunity. For investors, this could provide a seasonal opportunity to take a closer look at their allocation to municipal fixed income.
Investing involves risk, including the possible loss of principal.
Past performance does not guarantee future results.
Nothing presented should be construed as a recommendation to purchase or sell any security or follow any investment technique or strategy.
Charts shown throughout are for illustrative purposes only and not meant to predict actual results.
Chart is for illustrative purposes and is not representative of the performance of any specific investment.
The views expressed represent the investment team's assessment of the market environment as of March 2021 and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice.
Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.
The investment may also be subject to prepayment risk, the risk that the principal of a bond that is held by a portfolio will be prepaid prior to maturity, at the time when interest rates are lower than what the bond was paying. A portfolio may then have to reinvest that money at a lower interest rate.
The Bloomberg Barclays Municipal Bond Index measures the total return performance of the long-term, investment grade tax-exempt bond market.
Macquarie Investment Management (MIM) is the marketing name for certain companies comprising the asset management division of Macquarie Group. Investment products and advisory services are distributed and offered by and referred through affiliates which include Delaware Distributors, L.P., a registered broker/dealer and member of the Financial Industry Regulatory Authority (FINRA) and Macquarie Investment Management Business Trust (MIMBT), a Securities and Exchange Commission (SEC)-registered investment advisor. Investment advisory services are provided by a series of MIMBT. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide. Delaware Funds by Macquarie refers to certain investment solutions that MIM distributes, offers, refers, or advises.
Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise.
All third-party marks cited are the property of their respective owners.