September featured heightened volatility, fueled by the Fed's decision not to raise interest rates and a dovish statement that factored in international concerns like never before, stoking worry over global economic conditions. Fixed income assets rallied, with particular strength in municipal bonds, led by longer duration and high yield credits.
Munis' positive performance was further aided by the lightest September issuance in over a decade. New supply for the month came in at $18.3 billion, which was 23% below the five-year average and 31% lower than the 10-year average. Meanwhile, the demand trend seemed to point to a looming sense of investor uncertainty, with negative flows turning decidedly positive after the Fed’s decision, only to resume outflows in the final week of the month. In all, September was marked by $1.25 billion in outflows, though flows remain positive year-to-date at $5.6 billion. Given the prevailing global backdrop, we continue to expect a low-for-longer interest rate environment in which high-quality fixed income assets will be a preferred choice among investors.