Finding a Home for Cash in the Municipal Bond Market


Typically, during the months of June and July, a high volume of municipal bonds will mature or be called, leaving investors to roll those proceeds into other municipal bonds. This year, due to a recent decline in new municipal bond issuance, investors attempting to roll over maturing or called debt may be presented with some challenges.

In an effort to maintain balanced budgets, and during a period when voters have become more selective about approving new borrowing, states and municipalities have been issuing fewer new bonds. Based on data from Thomson Reuters through May 31st, year-to-date issuance has declined by 24.8% relative to the same period in 2013.

The reduced supply has coincided with an increase in demand brought about by higher tax rates that are expected to continue rising in the future. The tax-exempt income provided by municipal bonds, particularly the double-exempt income available on bonds issued in an investor’s state of residence, present investors with attractive taxable-equivalent yields and the opportunity to manage their income tax liability.

As large institutional investors, municipal bond mutual funds maintain numerous trading relationships with counter-parties across the country. Those trading relationships, and the high dollar volume of fund trades, will often make it possible for a mutual fund to acquire bonds in the market when individual investors have difficulty doing so.

Investors receiving proceeds from bonds that are maturing or being called may find that municipal bond mutual funds provide a viable alternative to individual bonds during this period of limited bond supply. Mutual funds also offer investors a range of features and services. To learn more, speak with your financial advisor, and review information found on this site regarding our state-specific municipal bond mutual funds.


Mutual fund investing involves risk; loss of principal is possible. Investments in bonds may decline in value due to rising interest rates, a real or perceived decline in credit quality of the issuer, borrower, counterparty, or collateral, adverse tax or legislative changes, court decisions, market or economic conditions. Trust performance could be more volatile than that of funds with greater geographic diversification.

Before investing in a Fund offered by Aquila Group of Funds, carefully read about and consider the investment objectives, risks, charges, expenses, and other information found in the Fund prospectus. The prospectus is available on this site, from your financial advisor and when you call 800-437-1020.