Summary

• Munis extended their rally, posting ten consecutive positive monthly returns since last April's 'Liberation Day' drawdown, while volatility gradually declined from previously elevated levels.
• Disruptions to oil and gas shipments through the Strait of Hormuz drove energy prices sharply higher and renewed inflation concerns, reducing market expectations for future Fed rate cuts.
• The Tax Exempt Sustainable Composite was modestly negative for the quarter after a strong start (+2% through February).
• The Revenue Bond Index outperformed the GO Bond Index, as spreads across investment-grade rating categories tightened during the quarter.
• The Tax Exempt Sustainable Composite team continues to emphasize bond structure over incremental credit risk.

The municipal bond market started the year strong. The Fed resumed its easing cycle in late 2025 and shifted focus toward a softening labor market, helping drive yields lower alongside solid investor demand through January and February. Munis

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