Municipal Fixed Income 1Q22 Market Review & Outlook

April 13, 2022 — What a difference a quarter can make. The municipal market did a complete 180-degree turn from a technical environment and valuation perspective. Like clockwork, the negative feedback loop that results from negative municipal returns caused heavy mutual fund outflows to the tune of $30 billion, one of the largest on record in recent history. On a positive note, the broad market economic recovery continues to improve fundamentals as municipal issuers continue to experience higher-than-projected income and sales tax receipts, leading to an increase in tax rebates. Inflationary cost pressures are putting some fiscal strain on essential service revenue sectors; however, almost all municipal sectors continue to experience a post-Covid recovery environment, which should continue for the foreseeable future.