Summary

• Municipal bonds modestly declined in the first quarter amid a sharp increase in volatility as escalating tensions in the Middle East led to inflation fears.
• The fund also declined and narrowly underperformed its benchmark, the Bloomberg Municipal Bond Index, for the quarter.
• Individual security selection and sector allocation were the main contributors to the fund's underperformance versus the index.

Market review and outlook

Municipal bonds declined slightly in the first quarter amid increased volatility. The key factor was an escalating conflict in the Middle East during the latter half of the quarter, which led to a