Skip to Content
Fund Spy

Munis Keep Raking in Cash, Posting Respectable Gains

Despite concerns about Puerto Rico and higher rates, municipal-bond funds have continued their run in 2016.

Mentioned: , , , , ,

After a strong showing in 2014 on both an absolute and relative return basis, muni bonds again emerged as a top-performing asset class in 2015. Driven by strong inflows to municipal-bond funds and a mostly benign credit environment, the national muni-bond fund Morningstar Categories were among the best-performing of Morningstar’s U.S. bond categories. Yet with the fear of additional Federal Reserve rate hikes and the muni market’s largest default looming as Puerto Rico’s credit quality deteriorated, some market watchers cast doubts on whether muni bonds would continue to their run into 2016.

Flows Into Muni-Bond Funds Remain Strong
Those worries faded quickly in the first half of this year. The Fed’s rate hike failed to materialize, and overall credit quality throughout the muni market remained solid. Assets continued to pour into muni-bond funds, offsetting an increase in supply as more municipal borrowers came to market. Through June 2016, funds in Morningstar’s open-end municipal bond categories experienced nine consecutive months of net inflows totaling roughly $37.4 billion. The biggest recipients of those assets were the more interest-rate- and credit-sensitive of the group, with strong net flows into the muni national intermediate-term, muni national long-term, and high-yield muni categories.

Elizabeth Foos does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.