Limited supply has supported municipal bonds in 2018

Tax reform created a rush of issuance last year

 Time to read: 3 min

Recently, municipal bonds have performed well despite increased market volatility and a rising interest rate environment that saw the 10-year US Treasury yield breach 3% a number of times this year.1 The Bloomberg Barclays Investment Grade Municipal Bond Index has returned 0.49% and the corresponding high yield municipal index has returned 1.07%, quarter-to-date.2 We believe this strong muni performance was due in part to investor risk aversion that has benefitted both municipal bonds and Treasuries as well as a reduction in muni supply following the 2017 tax reform.

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How have Hurricanes Harvey, Irma and Maria impacted the municipal bond market?

Affected regions’ long-term outlooks largely depend on initial credit conditions

Time to read: 4 min

The financial impact of 2017’s three devastating hurricanes has varied greatly depending on the region affected. From a credit standpoint, the most important takeaway is that each region’s ability to withstand the financial impact of the storms depends on its credit quality ahead of the storm. This does not bode well for Puerto Rico and the US Virgin Islands, which have been struggling with deteriorating fiscal conditions for some time. On the other hand, Houston and Florida are beginning the rebuilding process from a much stronger economic and financial position. Below we examine the storms’ impact on each affected region.

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