Original article by Amanda Albright
Wesly Pate, portfolio manager at Income Research + Management, spoke with Bloomberg about the growing decorrelation between municipal bonds and Treasuries since the COVID-19 pandemic took hold. Wesly said that the two markets decoupled because munis’ buyer base has become stickier, given embedded gains in muni portfolios. Munis are likely to retain a greater amount of their value compared to other asset classes in the case of a Treasuries sell off, he said. Wesly also suggested that munis’ stickier retail base and large embedded gains is likely to keep turnover low and volatility muted compared to other classes through 2022.
