Ultra Short Tax-Free Income Fund Commentary
The short end of the municipal market experienced dramatically higher yields in the first quarter as market participants became concerned that the Federal Reserve is behind the curve in the fight against inflation and will need to raise the overnight lending rate more than anticipated. Yields on fixed-rate paper in the 1-year maturity range rose over 100 basis points (1.0%) during the period. This move was not only due to tracking the Treasury market, but also attributable to pressure caused by outflows from municipal bond funds during the quarter. The subsequent selling of bonds by funds in the secondary market in order to meet the redemptions pushed rates higher as supply outweighed demand. Yields on variable rate demand notes (VRDNs) also moved up considerably during the period. The SIFMA index rose from 0.10% to 0.51% during the quarter, reaching its highest level since April 2020.
Positioning the Ultra Short Tax-Free Income Fund
Portfolio composition is subject to change.
The Fund will continue to seek opportunities to lock in attractive yields in the fixed rate market. In addition, with rates on VRDNs finally starting to rise in conjunction with the Fed’s moves, the Fund will look to have a more balanced mix of fixed rate and variable rate holdings.
Why should investors consider investing in this Fund?
The Ultra Short Tax-Free Income Fund should provide an attractive tax-free yield as well as a relatively stable net asset value in a rising rate environment as the Fed continues its tightening cycle in the coming months.
Not FDIC Insured | No Guarantee | May Lose Value