Salient to Investors:

April is the most rewarding for investors in the municipal market – since 2009, yields on benchmark 10-year debt have fallen more in April than any other month. April has shown gains in each of the past six years. Yields on 10-year benchmark munis have fallen in April by 9 percent on average in the past 5 years, the biggest monthly drop in yields. Munis have lost value in March for 5 straight years as investors sell tax-exempt debt or avoid buying the securities to make tax payments.

John Hallacy at Bank of America Merrill Lynch said bondholders receive the most cash from maturing debt and coupon payments in June, July and August, so start planning how to invest that money in April – once they know their April 15 tax bill, they can invest. Hallacy said it’s just a seasonally strong month for a lot of technical reasons, including investors getting bonuses or other first-quarter payments.

Chris Mauro at RBC Capital Markets said during the past 10 years, investors on average pulled cash from muni funds in the second week of April, after adding money each week in March, and muni fund flows generally have returned to positive territory after April 15. Mauro said given the early March outflows in 2013, this snap back pattern in 2013 may not happen.

Craig Brothers at Bel Air Investment Advisors said yields on Treasuries tend to drop at this time of year as investors switch from equities, while munis are not as cheap relative to Treasuries as in previous years.

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