Malloy: Federal stimulus monies from the past few years have given state and local governments the opportunity to build rainy day funds, provide funding for pension obligations, and position themselves to weather future downturns. At the same time, property values rose during the pandemic, as did incoming tax receipts. The combination of these two funding sources left many municipalities in better financial shape than they were pre-pandemic.
Kiselak: The big message behind the fiscal stimulus of the past few years is that our federal government supported state and local governments at times of financial stress. That’s impactful—combined, the local economies across the U.S. are what make up our national economy.
At the same time, it’s a positive for investors when municipalities shore up their balance sheets. Right now we’re seeing the highest municipal yields that we've had over the past 10 years. It’s a high-quality asset class—more than 85% of the market is rated A or higher, according to Bloomberg indices2—with a strong fundamental risk profile, particularly compared with corporate bonds.