Muni-Bond Yields Have Finally Climbed Enough to Entice Buyers

Municipal-bond yields at the highest in more than a decade are spurring optimism on the part of investment managers, who have been dealing with persistent fund outflows this year as the market has struggled along with the rest of fixed income.

The muni market is on track for a second straight year of declines, punished by the Federal Reserve’s interest-rate increases and its message that it intends to keep borrowing costs higher for longer to tame inflation.

Yields have surged across the bond universe, with one measure of rates rising to levels last seen in 2009. For market participants speaking on a Bloomberg muni-market panel Monday evening in New York, the selloff may have reached a point where demand will re-emerge.

“We are finally at levels where people want to buy things,” Catherine Crews co-head of municipal syndication at RBC Capital Markets, said on the panel.

Fellow panelists Alex Petrone, who is director of fixed income at Rockefeller Asset Management, and Chuck Peck, head of the municipal products group at Wells Fargo & Co., discussed today’s rate environment and how it’s opened up new challenges with issuance sinking from last year.

Muni Issuance Has Declined This Year