An active approach to diversified tax-exempt income
Nuveen's forward-thinking approach to portfolio construction leverages 125 years as a leader in the municipal bond industry to help achieve outcomes that align with investors’ tax-exempt income objectives while seeking to minimize downside risk.
Highlights
- In June, the Federal Reserve (Fed) left the federal funds rate unchanged and updated their dot plot projection. For 2024, they reduced their forecast of 75 basis points (bps) in rate cuts to 25 bps. However, they increased their 2025 forecast from 75 to 100 bps. Treasury yields rose across the curve, with the 2- and 10- year up 13 and 20 bps, respectively. The 2-year/10-year yield spread ended the quarter with an inversion of 36 bps.
- AAA municipal/US Treasury ratios (“ratios”) were mixed over the quarter. The 2- and 10-year ratios rose by 7% and 5%, while the 30-year declined by 3%. The 2-, 10- and 30-year ratios ended the quarter at 68%, 65% and 83%.
- Changes made this quarter reflected a modest increase in intermediate municipal ratios and tighter credit spreads. In the conservative model, limited term exposure was reduced in favor of intermediate duration. High yield municipal spreads narrowed by 12 basis points over the quarter, leading to a reduction in high yield and short duration high yield exposure in the moderate model in favor of investment grade exposure. This preference was also reflected in the high income model, where high yield was reduced in favor of limited term exposure.
