Municipal Bonds Break Several Records in 2022

For Municipal Bonds, 2022 will be one of those years that investment manager selectors look at closely when evaluating portfolio's in the future. Investment Grade Municipal Bonds posted their worst calendar year performance in 20 years, and third worst on record.

The irony for municipal bond investment managers was that across all maturities and ratings, municipal bonds generally outperformed most other fixed income segments, including treasuries and corporate bonds. And yet, outflows were almost double the levels experienced during the 2013 taper tantrum.

To add psychological pain to performance suffering, this all happened in parallel with fundamentals actually also breaking some records. Local tax collections were higher than the previous record set in 2021. And defaults were contained to specific high yield sectors and lower than 2021.

Relatively speaking, municipal bonds had an outstanding 2022. But investors were simply not convinced. As we enter 2023, perhaps the relative fundamental and performance picture will regain investor attention, and some new municipal bond RFP opportunities will get launched on RFPnetworks.