BlackRock Predicts November May Be the Top Month of 2023 for Municipal Bonds

Strong Performance of Municipal Bonds: BlackRock anticipates a strong month for municipal bonds in November, historically the best month for returns, with an average total return of 1.26% over the past decade. The firm expects similar trends to continue into 2025, supported by a decline in issuance and favorable market conditions.

Tax Advantages and Attractive Yields: Municipal bonds are favored by wealthy investors due to their tax-exempt status, with current yields offering attractive returns, particularly for high-income earners in high-tax states. The iShares National Muni Bond ETF has a 3.33% yield, potentially equating to nearly 6% for top tax bracket earners.

Investment Strategy and Focus Areas: BlackRock's investment strategy includes a barbell yield-curve approach, focusing on high-quality municipal bonds in sectors like transportation, housing, and corporate munis. The firm prioritizes issuers with strong financial fundamentals and manageable debt levels.

Selective Investments and Risk Management: The firm is overweight on prepaid gas munis and housing bonds, emphasizing investments with reliable revenue sources. BlackRock also considers risks related to counterparties and structural factors, ensuring a focus on high-quality issuers and stringent bond documentation.