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First Quarter 2012The Barclays Capital Municipal Bond Index rose 1.75 percent during the first quarter. The long end of the yield curve was the key driver of the strong performance as the best-performing portion in the municipal curve was bonds that mature in 20 years or more. The 20-year portion of the curve rose 2.94 percent, while bonds maturing in 22 years or more rose by 3.80 percent. The yield curve flattened as yields on the long end of the curve declined by more than the short end. Credit factors also played a role in performance as low quality significantly outperformed high quality. AAA-rated municipals rose by 0.74 percent in the quarter versus 4.17 percent for BBB-rated bonds. General obligation municipals underperformed revenue backed bonds as lower-quality areas such as industrial development and hospital bonds outperformed. In specialty-state trading, Illinois and California outperformed, while New York and Massachusetts underperformed. Fears of the ongoing financial crisis in Europe and the rising potential of very slow growth or even recession remain, and have virtually ensured the Federal Reserve would not tighten monetary policy in the near future. The Fed stayed on the sidelines during the quarter, letting other global central banks provide additional stimulus to the global economy. Past performance does not guarantee future results. The Barclays Capital Municipal Bond Index is an unmanaged index representative of the tax-exempt bond market. |
