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Municipal Bonds

Individual investors are at a pricing disadvantage

Overhead view of intersecting highways at an overpass

The U.S. municipal securities market is an institutionally dominated and negotiated market characterized by inefficient pricing. There is no central location, like a stock exchange, where orders can be placed for individual investors to trade municipal bonds. This can make it difficult for these investors to obtain the best prices. In general, the larger the trading block, the lower the trading costs.

In a low yield environment, pricing matters 

Spreads widened considerably during the pandemic, shrank to below pre-pandemic levels, then widened again since the beginning of 2022. Bond price declines since mid-2021 might ultimately explain the spread widening due to three factors. First, dealers tend to charge fixed amounts for retail trades. When a bond’s price falls, a fixed charge represents a higher percentage of the price and thus a wider spread. Second, bonds priced below par could be less liquid because the appreciation of the market discount is taxed as ordinary income if the size of the discount exceeds certain parameters, and less liquid bonds tend to have wider spreads. Third, in an environment of historically low interest rates, investors may have been more sensitive to the impact of transaction costs on their already low returns, constraining what dealers could charge.

Active management can add value

Nuveen believes five key differentiators are important to creating portfolio growth.

Leading the way in municipal bonds 
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1As of 30 Jun 2023. Nuveen assets under management (AUM) is inclusive of underlying investment specialists.

For more information on the methodology, please visit Copyright © MSRB 2023. All Rights Reserved. The data are provided without representations or warranties and on an “as is” basis. The MSRB hereby disclaims all representations and warranties (express or implied), including, but not limited to, warranties of merchantability, non-infringement and fitness for a particular purpose. Neither the MSRB nor any supplier of data to the MSRB shall in any way be liable to any recipient or user of the data, regardless of the cause or duration, including, but not limited to, any inaccuracies, errors, omissions or other defects in the data or for any damages resulting therefrom. The MSRB has no obligation to update, modify or amend data herein or to provide notice to any person if any is inaccurate or incomplete. This data were prepared for general informational purposes only, and it is not intended to provide, and does not constitute, investment, tax, business, legal or other advice. Provision of the data by the MSRB to a firm, organization or other entity (“Recipient”) does not constitute and should not be interpreted as an endorsement of Recipient or Recipient’s product or services. The MSRB is not affiliated with, nor does it sponsor, Recipient. The MSRB does not review, approve or have any responsibility for use of the data by Recipient, including, but not limited to, in research or other material or content prepared by or on behalf of Recipient.

The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Performance data shown represents past performance and does not predict or guarantee future results. Investing involves risk; principal loss is possible.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. For term definitions and index descriptions, please access the glossary on Please note, it is not possible to invest directly in an index.

Important information on risk

Investing involves risk; principal loss is possible. Investing in municipal bonds involves risks such as interest rate risk, credit risk and market risk. The value of the portfolio will fluctuate based on the value of the underlying securities. There are special risks associated with investments in high yield bonds, hedging activities and the potential use of leverage. Portfolios that include lower rated municipal bonds, commonly referred to as “high yield” or “junk” bonds, which are considered to be speculative, the credit and investment risk is heightened for the portfolio. Bond insurance guarantees only the payment of principal and interest on the bond when due, and not the value of the bonds themselves, which will fluctuate with the bond market and the financial success of the issuer and the insurer. No representation is made as to an insurer’s ability to meet their commitments. This information should not replace an investor’s consultation with a financial professional regarding their tax situation. Nuveen is not a tax advisor. Investors should contact a tax advisor regarding the appropriateness of tax-exempt investments in their portfolio. If sold prior to maturity, municipal securities are subject to gain/losses based on the level of interest rates, market conditions and the credit quality of the issuer. Income may be subject to the alternative minimum tax (AMT) and/or state and local taxes, based on the state of residence. Income from municipal bonds held by a portfolio could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager.

Institutional trade execution applies primarily to municipal bond trading as part of ongoing account management and generally does not include sales of legacy securities contributed to new or existing accounts or in connection with termination and liquidation instructions. Nuveen seeks to expeditiously and efficiently effect sales of legacy securities contributed to new or existing accounts or in connection with termination and liquidation instructions, generally by directing the execution of sale to the relevant broker-dealer/custodian designated by the client’s managed account program, subject to program limitations. Primarily due to the time constraints and lot sizes applicable to these transactions, and because the full range of trading techniques is generally not available (including aggregation), the prices received in these transactions may be less favorable than the prices that could be attained for sales of securities selected as part of ongoing management. Clients always reserve the right to fund accounts with cash as opposed to legacy securities and to keep any securities in their accounts upon termination of services.

Nuveen provides investment advisory solutions through its investment specialists.

This information does not constitute investment research as defined under MiFID.

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