Despite recent events in Detroit, I believe the famously coined term “green shoots” is an apt descriptor for the municipal bond market at this present time.
Having been scorched by the wildfire correction that engulfed the fixed-income markets since the end of April, as evidenced by the sharp rise in interest rates (represented in the graph below), there now seems to be indication of a broadening of support for munis from the retail/registered investment advisor community.
I have seen inquiries coming from dealers looking for bonds across the spectrum — indeed a welcome sight. The question remains: When does this become an embedded strategy that brings assets back to mutual funds and ETFs?
Two weeks ago, I observed that opportunistic investors (e.g., non-traditional and hedge fund) stepped into the breach and provided added liquidity for individual bonds that were burdensome to dealers’ balance sheets. [Detroit City Blues]