Municipal Market Outlook

Monday 10 March 2025

Investment Talks

Municipal Market Outlook

March 2025 | Unlike the US Treasury curve, the tax-exempt curve remains significantly positively sloped, leading to elevated yields in core and longer-duration municipal strategies. The high yield municipal market, in our view, displays a potential opportunity to provide not only tax-efficient dividends, but also pockets of price appreciation found in select sectors and security themes. In general, we expect credit stability in 2025, with potential policy shifts creating both credit negatives and positives. Some of these policy impacts may be felt in port issuers: broadly applied tariffs could impact bottom lines; hands-off energy policy could benefit traditional energy-producing local agencies and states; and Medicaid and Medicare reimbursement eligibility rate shifts could negatively impact smaller regional health care systems.

01 | The municipal yield curve remains steeper than the taxable curve, resulting in a strong relative yield play in intermediate and long-dated municipal bonds.

02 | Country-wide infrastructure financing needs will fuel the need for tax-exempt debt issuance backed by high-quality, bipartisan-supported projects.

03 | Political sparks are creating sector rotation opportunities in areas targeted for reform. We are downgrading the healthcare sector and finding top opportunities within the retirement-related sectors and transportation.

Municipal Market Outlook

Important Information

Unless otherwise stated, all information contained in this document is from Amundi Asset Management as of March 3, 2025. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product or service. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not indicative of future results. Amundi US is the US business of Amundi Asset Management.

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