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 kept interest rates unchanged and released an updated dot plot projection. The Fed maintained its projection of a 50-basis point rate cut in 2025, while lowering its 2026 projection to just 25 basis points.
- In Q2 2025, the 5-year ratio declined, the 10-year held steady, and the 30-year ratio increased, ending the quarter at 70%, 77% and 95% respectively. A surge in municipal issuance, totaling $296 billion year to date (up 17% versus 2024) steepened the curve and put pressure on returns. Most of this supply reflects ongoing fiscal policy uncertainty and the expiration of pandemic era aid. As a result, the market remains bifurcated: short and intermediate municipal bonds (up to 12 years) are in positive territory, while longer maturities continue to struggle. Although technical pressures have recently dampened municipal bond performance, signs of improvement are beginning to emerge, supported by strong summer reinvestment demand and the potential for reduced seasonal issuance.
- These market dynamics informed the quarterly adjustments to our models. In the Conservative model, a small reallocation was made from Nuveen Intermediate Duration Municipal Bond to Nuveen Limited Term Municipal Bond. In the Moderate model, Nuveen Short Duration High Yield Municipal Bond was modestly reduced in favor of Nuveen High Yield Municipal Bond and reallocated from Nuveen Intermediate Duration Municipal Bond to Nuveen Limited Term Municipal Bond. In the High-Income model, Nuveen High Yield Municipal Bond, Nuveen Short Duration High Yield Bond, and Nuveen Intermediate Duration Municipal Bond were trimmed to increase Nuveen Limited Term Municipal Bond exposure.
