logo
  • Products

    Investment Vehicles

    • ETFs
    • Commingled Funds
  • Investment Strategies

    Investment Options

    • Alternatives
    • Beta Strategies
    • Equities
    • Fixed Income
    • Global Liquidity
    • Multi-Asset Solutions
    • Commingled Funds

    Capabilities & Solutions

    • ETFs
    • Global Insurance Solutions
    • Liability-Driven Investing
    • Pension Strategy & Analytics
    • Outsourced CIO
    • Retirement Solutions
    • Sustainable Investing
  • Insights

    Market Insights

    • Market Insights Overview
    • Eye on the Market
    • Guide to the Markets
    • Guide to Alternatives
    • Market Updates

    Portfolio Insights

    • Portfolio Insights Overview
    • Alternatives
    • Asset Class Views
    • Currency
    • Equity
    • Fixed Income
    • Long-Term Capital Market Assumptions
    • Portfolio Strategy
    • Sustainable Investing Insights
    • Strategic Investment Advisory Group

    Retirement Insights

    • Retirement Insights Overview
    • Guide to Retirement
    • Defined Contribution
  • Resources
    • Center for Investment Excellence Podcasts
    • Events & Webcasts
    • Insights App
    • Library
    • Taft-Hartley
    • market volatility
    • Morgan Institutional
  • About Us
    • Trusted Asset Manager
    • Diversity, Equity & Inclusion
    • Sustainable Investing
  • Contact us
Skip to main content
  • English
  • Role
  • Country
  • Morgan Institutional
    Search
    Search
    Menu
    You are about to leave the site Close
    J.P. Morgan Asset Management’s website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. Please review its terms, privacy and security policies to see how they apply to you. J.P. Morgan Asset Management isn’t responsible for (and doesn't provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan Asset Management name.
    CONTINUE Go Back
    1. Municipal bonds: views on the recent dislocation and the opportunity it presents

    • LinkedIn Twitter Facebook

    Municipal Bonds

    Views on the recent dislocation and the opportunity it presents

    03/13/2020

    The dislocation due to fears of COVID-19 has been felt in all markets. The municipal market has seen a dramatic sell-off that sent municipal yields sharply higher over the past few days. The sell-off can be attributed to a combination of factors including outflows from high yield and investment grade funds and less liquidity in the global markets. The municipal market is oversold and is now trading at valuations not seen since 2008-2009.

     

    The recent sell-off in the municipal market has been driven by illiquidity in the broader municipal, corporate, and equity markets. The magnitude of the downside price action experienced this week is very similar to 2008. Yet, the fundamental credit quality of most municipal subsectors is strong and well-positioned for a period of stress.

    The macroeconomics supporting most of the municipal bond subsectors in which we invest will be able to sustain the projected downward pressure from reduced economic activity arising from the COVID-19 spread and mitigation efforts.

    Over the last week, municipal yields rose 75-100 bps across the curve and credit spreads are wider.

    Municipal mutual fund flows, which had been continuously strong for 61 weeks, reversed course as $1.4bn came out of funds. Bonds out for the bid, which had been averaging $685mn per day over the past year, started picking up last week and averaged $2.5bn over the past three days. With sustained outflows creating a steady stream of bid wanteds and constrained liquidity, the market struggled to find clearing levels, and cheapened to ratios not seen since 2008.

    Municipals are now trading at exceptionally cheap levels relative to U.S. Treasuries which has created a significant opportunity for long term bond investors. Their valuations belie the underlying strength of the sector.

    Download the full PDF


    0903c02a82842249

    • Municipals
    J.P. Morgan Asset Management

    • About us
    • Investment stewardship
    • Privacy policy
    • Cookie policy
    • Binding corporate rules
    • Sitemap
    • Accessibility
    Opens LinkedIn site in new window
    J.P. Morgan

    • J.P. Morgan
    • JPMorgan Chase
    • Chase

    READ IMPORTANT LEGAL INFORMATION. CLICK HERE >

    The value of investments may go down as well as up and investors may not get back the full amount invested.

    Copyright 2022 JPMorgan Chase & Co. All rights reserved.