2023 Mid-Year Outlook: Municipal Bonds

The old saying, "the more things change, the more they stay the same" appropriately summarizes the municipal bond market today. Despite an awful 2022 for total returns and an eventful first half of the year dominated by concerns about banking instability and the debt-ceiling drama, the outlook for the muni market is largely unchanged. Given the combination of attractive yields and strong credit conditions, we have a positive view on the muni market over the remainder of the year.


Just two years ago, the yield for a broad index of muni bonds was 1%, which was near the lowest level in the history of the index.1 In dollars and cents, it would take a portfolio of $1 million to generate $10,000 of interest income. An investor would need a very sizeable investment for not much income. That's no longer the case today. Since the trough in July 2021, yields have increased to above 3.5%. To generate the same $10,000 of interest income, an investor would now need a portfolio of roughly $280,000. While it's still a large amount, it's far less than $1 million.

broad index