The Waiting Has Begun to Pay Off - February 2022

February 25, 2022
Navigating the volatile markets is never easy, waiting through the ebbs and flows. Time has paid off; we see valuations of municipal bonds to dramatically improve. Yields have risen to more attractive levels and provide a safe way to enhance yields provided by money market.
The Waiting Has Begun to Pay Off - February 2022

After nearly a year of waiting, it took only six short weeks for valuations to dramatically improve. As can be seen in Exhibit I, the yields on short-term municipal bonds have now increased over 90 basis points , while Exhibit II shows that those higher yields exceed the after-tax yields that can be attained by U.S. Treasury securities across all maturities. These levels are more attractive and provide a way to enhance yields provided by money market instruments. Multi-decade high levels of inflation have driven a quick change in sentiment by the Federal Reserve and by investors. Even though the Fed has yet to tighten, today’s yield curve already reflects 225 basis points of tightening through the end of 2023.

BBH Intermediate Municipal Bond Fund

BBH Intermediate Municipal Bond Fund seeks to protect investors’ capital and generate attractive risk-adjusted returns through market cycles by combining thorough, independent credit research and a unique valuation discipline to identify undervalued municipal securities. We invest bottom-up and seek to own a limited number of durable credits that offer attractive yields.

Issuers with credit ratings of AA or better are considered to be of high credit quality, with little risk of issuer failure. Issuers with credit ratings of BBB or better are considered to be of good credit quality, with adequate capacity to meet financial commitments. Issuers with credit ratings below BBB are considered speculative in nature and are vulnerable to the possibility of issuer failure or business interruption.

Opinions, forecasts, and discussions about investment strategies represent the author's views as of the date of this commentary and are subject to change without notice. References to specific securities, asset classes, and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as recommendations.

RISKS
Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk; investments may be worth more or less than the original cost when redeemed. Income from municipal bonds may be subject to state and local taxes and at times the alternative minimum tax.

Investors should be able to withstand short-term fluctuations in the fixed income markets in return for potentially higher returns over the long term. The value of portfolios changes every day and can be affected by changes in interest rates, general market conditions and other political, social and economic developments.

For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the fund’s prospectus, which you should read carefully before investing.

Shares of the Fund are distributed by ALPS Distributors, Inc. and is located at 1290 Broadway, Suite 1000, Denver, CO 80203.

Brown Brothers Harriman & Co. ("BBH"), a New York limited partnership, was founded in 1818 and provides investment advice to registered mutual funds through a separately identifiable department (the "SID"). The SID is registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940.

Not FDIC Insured    No Bank Guarantee    May Lose Money

 


IM-10732-2022-02-22  BBH003484    Exp. Date 03/31/2023

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