If you’re looking for reasons to believe in municipal bonds, there’s a host of new data on muni credit trends worth checking out. This month’s muni market snapshot from the Wells Fargo Asset Management Municipal Fixed-Income team provides an update on credit conditions. In this post, we’ll review how munis fared in May and explore new research from Standard & Poor’s that digs deep into some key factors behind muni creditworthiness in 2015.

May 2016 market snapshot

Munis posted another month of positive results, helped by favorable supply and demand trends. Here’s an infographic detailing these facts:

Corporate bonds have rebounded from severe sell-offs and muni bonds are no longer rich in comparison

This month’s snapshot of the municipal bond market from the Wells Fargo Asset Management Municipal Fixed-Income team provides an update on opportunities in crossover taxable markets:

We’ve been reporting on select opportunities that were available to investors willing to consider taxable municipal investments. Muni bonds appeared rich compared with corporate bonds earlier in the year, which made taxable investments look attractive. Recently, however, the strong performance of corporate bonds has brought valuations back in line.

Muni bond insights—April update

Muni bonds continued to perform well during April. The Barclays Municipal Bond Index returned 0.74%, the 10th consecutive month of positive total returns. Year to date, the index returned 2.42%. Meanwhile, BBB-rated muni bonds outperformed AAA-rated muni bonds during the first four months of 2016, driven by modest spread compression and a larger income component. As the chart below shows, muni bond prices have been positive over the past year and the asset class has been more stable than both the investment-grade and high-yield corporate bond markets.

This month’s snapshot of the municipal bond market from the Wells Fargo Asset Management Municipal Fixed-Income team focuses on opportunities in crossover taxable markets:

  • Cross-market relative value shows that taxable credits continue to offer relative value. The yields on taxable muni bonds have widened compared with their tax-exempt counterparts.
  • Meanwhile, muni credit continues to perform better than corporate credit, resulting in after-tax yields of certain corporate issuers that look significantly more attractive than the tax-exempt yields of muni bonds.

To start, here’s an infographic highlighting recent muni bond trends: