Frenzy in Muni Bonds Projected to Continue in 2020

Investors are heading into this year still eager for municipal bonds after a 2019 buying binge supercharged returns.
High-income households looking for tax relief drove record inflows into muni-bond mutual funds last year, with the S&P Municipal Bond Index up 7.26% during the 12 months ended Dec. 31.
Some analysts project that muni-bond mutual funds will continue that growth in 2020.
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In addition to investor demand, a lack of issuance from cities and states has also driven up prices. Following a decade of tight government budgets and new limitations on borrowing, tax-exempt debt outstanding fell slightly in the roughly $4 trillion bond market.
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Expectations of continued low rates around the world have left investors willing to pay handsomely for muni bonds, including those that don’t throw off tax-exempt interest.
“The market is shrinking against really strong demand,” said David Hammer, head of municipal bond portfolio management at Pacific Investment Management Co.

Read more: Wall Street Journal.