Municipal Strategies-Global Breadth, Local Depth

TEAM AND PROCESS
KEY VIEWPOINTS
MUNI SOLUTIONS
ADDITIONAL INSIGHTS

Western Asset connects macro insights, deep credit experience and quantitative tools to navigate the dynamics of the fragmented municipal market and deliver tailored client solutions.

Team and Process

Western Asset's municipal investment management is anchored by our deep knowledge of investing across a range of fixed-income sectors. Our team of veteran investment professionals brings unparalleled expertise, delivering unique municipal solutions to help meet client objectives across various market cycles.

Western Asset for Munis

Long-Term Track Record: Demonstrated outperformance across strong and weak market environments
Expert Team: Industry-leading portfolio managers with an average of over 25 years in municipal markets
Fixed-Income Specialists: A single focus that sets our capabilities apart

30+ credit research analysts across the Firm
Municipal risk management professionals
Proprietary quantitative resources including AI and machine learning tools

How We Approach Munis

"Our municipal team brings a long-term track record of performance, deep expertise and access to the full breadth of Western Asset’s fixed-income platform—a powerful edge in identifying value and managing risk for our clients."

Robert E. Amodeo, CFA, Head of Municipals

With a proven philosophy and process intended to manage risk and drive long-term growth, Western Asset is well-equipped to capture risk-adjusted relative value opportunities.

Key Viewpoints

The decade-high tax-exempt income opportunities offered by munis contribute to attractive after-tax yield pickup and return potential versus riskier corporate bond and equity counterparts. They also offer important quality and diversification characteristics that round out a unique value proposition for investors subject to tax rates.

Tax-Exempt Income Opportunities Have Approached Historically High Levels

Long-term equity return: S&P 500 Index annualized monthly returns from 01 Jan 00 to 31 Dec 24. As of 31 Dec 24. Bloomberg indices considering the highest marginal tax rate of 40.8%: National: Bloomberg Municipal Bond Index │CA: Bloomberg California Municipal Bond Index │NY: Bloomberg New York Municipal Bond Index Yield-to-worst (YTW) is the lowest potential yield that can be received on a bond without the issuer actually defaulting. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results.

Since 2000, the volatility of municipal returns (4.7%) has been just a fraction of the volatility of equities (15.3%).

Fundamentals Are Improving

Source: Moody's Investors Service US Public Finance: US municipal bond defaults and recoveries, 1970-2023. As of 24 Oct 24.

Historically, munis default much less frequently than corporates, and credit fundamentals continue to improve as tax receipts reach record levels.

Valuations Remain Attractive Despite Recent Spread Tightening

Source: Bloomberg, Western Asset. As of 7 Feb 25. 10- and 30-Year comparison reflects Bloomberg Valuation Service (BVAL) AAA Muni Curve and US On-/Off-the-Run Sovereign Curve. AA Muni reflects the Bloomberg AA Muni Bond Index. A Muni reflects the Bloomberg A Muni Bond Index. BBB Muni reflects the Bloomberg BBB Muni Bond Index. HY Muni reflects the Bloomberg High Yield Muni Bond Index. AA Corp reflects the Bloomberg AA Corporate Bond Index. A Corp reflects the Bloomberg A Corporate Bond Index. BBB Corp reflects the Bloomberg BBB Corporate Bond Index. After-tax yield considers top marginal tax rate of 40.8%. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results.

The higher rate environment has improved the value of the municipal tax exemption. For those in higher tax brackets, munis offer higher after-tax yield opportunities than their taxable fixed-income counterparts.

Why Munis Now

"Western Asset's tailored municipal solutions benefit from an experienced team, robust analytics and extensive fixed-income resources, enabling them to navigate dynamic market conditions effectively."