An active approach to diversified tax-exempt income
Nuveen's forward-thinking approach to portfolio construction leverages 125 years as a leader in the municipal bond industry to help achieve outcomes that align with investors’ tax-exempt income objectives while seeking to minimize downside risk.
Highlights
- In September, the Fed reduced the federal funds rate by 50 bps and updated their dot plot projection. For 2024, they expect to reduce the policy rate by an additional 50 basis points. For 2025 and 2026, they expect to reduce rates by a combined 150 basis points. Treasury yields firmly declined across the curve. The 2- and 10- year yields were down 111 and 62 basis points. The 2-year/10-year spread uninverted over the quarter, after over two years with the shorter-term tenor outyielding the longer-term tenor.
- AAA municipal/US Treasury ratios (“ratios”) were mixed over the quarter. The 2-year ratio declined by 1%, while the 10- and 30-year rose by 4% and 3%. The 2-, 10- and 30-year ratios ended the quarter at 67%, 70% and 86%.
- Changes made this quarter were reflective of the team’s view of the yield curve steepening (short-term more attractive than intermediate) and strong fundamentals for high yield. In the conservative and moderate models, intermediate was reduced for limited-term. Intermediate was also reduced for high yield in the moderate model. In the high-income model, All-American was reduced in favor of intermediate duration, driven by the yield curve steepening expectation. Additionally, limited term was reduced for high yield.
