Market Review and Outlook 2nd Quarter 2009
As we mentioned in our last report, our investment team moved to lengthen the duration of our clients’ portfolios last fall when municipal yields were much higher, in some cases reaching twice the yield offered by Treasuries. We believed that municipal yields had overstated the risk of default and understated the decline in future inflation. We entered 2009 with an optimistic view of the municipal market, convinced that cheap valuations would support municipal prices when Treasury prices began their inevitable decline. This proved to be accurate.