As with most markets for goods and services, the price of municipal bonds is influenced by supply and demand. In recent years, the supply of new municipal bond issuance has trailed off as states and municipalities have tightened their fiscal belts. Meanwhile, a low interest rate environment together with the retiring of the baby boomer generation has led to healthy demand for municipal bond income. We expect this combination of subdued supply and healthy demand to be supportive of the municipal market for the foreseeable future.

Source: Ned Davis Research, with permission