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May 2015

The Barclays Municipal 3-Year Bond Index lost 0.21 percent for the month of May. Overall, rates were higher and muni-to-Treasury ratios elevated. The attractive taxable/tax-exempt ratio should continue to underpin the market. See complete fund performance here.

Volatility was pervasive in May as both the municipal bond and Treasury markets contended with mixed economic data and evolving Federal Reserve rhetoric surrounding interest rate normalization. Municipal bond issuance came in at a robust $31.9 billion, up 14.5 percent year-over-year, led by increased refundings as issuers continue to take advantage of historically-low rates ahead of possible future rate hikes. Demand for municipal bonds diminished somewhat with the healthy inflows seen in the first four months of the year turning slightly negative. This was not entirely unexpected, given credit concerns and Moody’s downgrade of Chicago to below-investment-grade status. With the fiscal year-end approaching, budget issues are at the forefront. Well-known pension offenders such as Illinois, Puerto Rico and New Jersey continue to see negative headlines, ratings pressure and wider credit spreads. The upside to a third down month is that yields have been pushed up to levels not seen in many months. This should attract buyers back to the asset class.

Moody’s downgraded Chicago to junk status following an Illinois Supreme Court decision stating pension benefits cannot be curtailed. The ruling left Chicago with little hope of improved pension health through cutbacks in benefits. The downgrade was particularly surprising since Moody’s has essentially discounted any options Chicago might have in dealing with its budget and pension situation, thereby putting pressure on the city’s liquidity position in the process. Separately, the state legislature is debating a bill that would authorize Chapter 9 for local governments. This could have a significant impact for Chicago and many surrounding suburbs.  

Past performance does not guarantee future results.

The Barclays 3-Year Municipal Bond Index is a total return benchmark designed for short-term municipal assets. The index includes bonds with a minimum credit rating BAA3, are issued as part of a deal of at least $50 million, have an amount outstanding of at least $5 million and have a maturity of 2 to 4 years.

Net Asset Value
as of 07/02/2015

Global Resources Fund PSPFX $5.46 No Change Gold and Precious Metals Fund USERX $5.45 No Change World Precious Minerals Fund UNWPX $4.54 0.03 China Region Fund USCOX $9.14 -0.13 Emerging Europe Fund EUROX $6.11 0.02 All American Equity Fund GBTFX $27.85 -0.07 Holmes Macro Trends Fund MEGAX $21.29 -0.06 Near-Term Tax Free Fund NEARX $2.24 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change