五月表现回顾

Restricted - External Grace Cen+1 212 526 3571grace.cen@barclays.comBCI, USMikhail Foux+1 212 526 7849mikhail.foux@barclays.comBCI, US FIGURE 2. MMD/UST RatiosApril 30Closem/m Change4.06-2bp5.841bp80%-5%4.1725bp92-3bp106-18bp55696%Source: MMD Dataline, Bloomberg Fixed Income IndicesSource: MMD Dataline, Bloomberg Fixed Income IndicesMay 2025 Performance OverviewThe Bloomberg Municipal Index posted a total return of 0.1% last month, bringing year-to-datetotal returns to -1%. IG munis slightly outperformed the US Treasury Index, which returned -1%(MTD). Muni ratios tightened across the curve. The MMD/UST 5y decreased by 10pp, the 10ydecreased by 5pp, and the 30y decreased by 2pp, ending the month at 71%, 75%, and 92%,respectively.The GO bond index returned 0.1% in May, with the revenue bond index returning close to zero.The highest outperforming revenue sectors were IDR/PCR (0.6%), Tobacco (0.4%), and ResourceRecovery (0.3%). Hospital (-0.3%), Special Tax (-0.1%), and Water & Sewer (-0.1%)underperformed the most. Puerto Rico (0.8%), New Mexico (0.7%), and Connecticut (0.5%)indices were the best-performing municipal states; Arkansas (-1.4%), South Dakota (-0.7%), andGuam (-0.6%) indices generated the lowest returns.Total return performance was positive across the short end to belly and flipped negative for15y+. The biggest relative outperformers were the 6-8y (1%) and the 4-6y (1%) indices. On theopposite side of the ledger, the long end (22y+) underperformed the most in total return terms(-1%), with the 17-22 y index also underperforming (-0.8%).Spreads for the taxable municipal aggregate-eligible index as well as the credit index tightenedm/m, by 3bp and 18bp, respectively. Taxable GOs barely underperformed taxable revenuebonds, by 0.01%, and outperformed corporates by 1.7% in excess returns; in the taxablesrevenue sector, the top outperformers were Power, Industrial, and Special Tax, while the biggestunderperformers were Leasing, Water and Sewer, and Transportation.The high yield municipal index generated a total return of 0.1%, bringing year-to-date totalreturns to -0.9%. Performance was varied across sectors, driven by higher returns in the airline,transportation, leasing.Market TechnicalsMuni supply:In May, supply was $50bn, higher than the $32bn average for the month during thepast five years and about 6% higher than the same period last year; net issuance for the monthwas $24bn. This brings year-to-date gross and net issuance to $216bn and $104bn, respectively.Taxable issuance came in at $3bn, 6% of May supply. For June, we forecast supply of $48-52bn,with net issuance at $15bn, not including $12bn in coupon payments. 2 Redemptions:We estimate that May redemptions were $26bn, higher than average for themonth in recent years; investors received about $4bn in coupon payments. We expectredemptions to be higher in June and forecast about $35bn in bond redemptions and about$12bn in coupon payments.Flows: Muni fund flows totaled about $3.1bn for the month, driven primarily by inflows fromnational and long term. Year-to-date, fund flows total $6.8bn (-1bn for mutual funds, $7.8bn forETFs), according to data from Refinitiv. 3 Municipal Research in MayNuclear Energy – Executive Orders a Positive for UtilitiesPresident Trump last Friday signed four executive orders targeting the nuclear energy industry,arguably the largest overhaul of the Nuclear Regulatory Commission (NRC) since its founding in1975. Given the wide-scale impact of these orders, we examine their potentialeffecton themunicipal utility sector. At a high level, these executive orders aim to: accelerate R&D in nuclearenergy; reduce the regulatory burden for constructing new facilities; strengthen the domesticsupply chain for nuclear fuel (see On a Collision Course, 30 May 2025).Municipal Default Recap and OutlookGoing into 2025, we expected a default rate of 1-1.5%, which would have been similar to whatwe saw in previous years, and we do not see it picking up significantly this year. In our outlookfor this year, we assumed that the US economy should remain strong, although some slowdownhad been expected in 2H25. Defaults year-to-date remain under $1bn, which annualized shouldbe about 1.3% of the HY index (see Trouble With the Curve, 23 May 2025).US Downgrade and ItsEffecton MunisWith Moody's downgrade of the US credit rating to Aa1, many questions continue about howmunis will fare. We explore where munis stand as a potential substitute to US Treasuries, howthey have behaved during past downgrades, characteristics of the AAA muni universe as analternative, and what other credits could likely be downgraded as a result of this recent ratingaction (see Trouble With the Curve, 23 May 2025).Student Loan Muni DebtCollection on federal student loans is expected to restart. As of now, nearly 43mn borrowersowe more than $1.6trn in student loan debt, and more than 5mn borrowers have not made amonthly payment in over 360 days. As a result, only 38% of borr