A season of opportunity for munis

While markets can be unpredictable, trends can help provide insight into potential cyclical opportunities. Historically within the municipal market, we have 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.

Municipal bonds' seasonality

Bloomberg Municipal Bond Index – average monthly returns over a 20-year period (2001-2020)

Source: 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 can position municipal fixed income as an attractive buying opportunity. This year could be one of those opportunities. With significant policy and legislative actions under negotiation in Washington, many of which may impact the technical side of the municipal market, we think volatility is likely, which may result in a cheapening in rates and widening of spreads. If higher yields do result, we view this as an opportunity for municipal investors to add to their municipal allocations.


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.

The views expressed represent the investment team’s assessment of the market environment as of October 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.

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The Bloomberg Municipal Bond Index measures the total return performance of the long-term, investment grade tax-exempt bond market.

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.

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