Vanguard Group: 46 billion yuan enters the market in a big way this year, the value of US municipal bond allocation continues to highlight

Paul Malloy, the municipal bond manager of The Vanguard Group Inc., stated that the attractive yield and strong credit fundamentals are laying a solid foundation for the municipal bond market in the second half of the year. In addition, events such as prepaid gas bonds, data centers, and property tax reforms are also worth noting. Investors in the highest tax bracket currently can get a yield of 3.62% in the municipal bond market, equivalent to a taxable security yield of 6.1%, which exceeds the yield of 5.26% for U.S. corporate bonds, with lower default rates for municipal bonds. Managing municipal bond assets worth $300 billion at Itron, Inc., Malloy said in an interview, "The yield in the municipal bond market has risen to an attractive level, with a steep yield curve. Holding municipal bonds in tax-exempt assets can provide stable returns; and in the event of major economic fluctuations, it can also act as a ballast in the overall fixed income investment portfolio." Morgan Chase pointed out in a report on June 5th that investors have poured $46 billion into the municipal bond market this year, the second highest inflow in history. The total return of the municipal bond market from the beginning of the year is 1.74%, outperforming the return of 0.08% for U.S. corporate bonds and the drop of nearly -0.5% for U.S. Treasury bonds. Malloy stated that the spread of nearly 190 basis points between 2-year and 30-year municipal bonds is attracting funds to the long end of the market; the rise in the stock market has also prompted some investors to rebalance and allocate funds to municipal bonds to maintain portfolio stability. He expects the full-year return on the municipal bond market to reach 3.5%. Malloy also mentioned the following related topics: Alphabet Inc. Class C (GOOGL.US)'s parent company Alphabet's participation in prepaid energy projects is drawing more attention to transactions that allow utility companies to lock in prices. He stated that more prepaid energy-related targets will be introduced in the future. Data centers are being financed through the bond market in the United States other than the municipal bond market, providing funds for the construction of facilities with thousands of servers. Malloy said that IRS regulations on the use of tax-exempt bond funds prohibit data centers from using municipal bonds for financing; federal tax laws restrict private companies from using tax-exempt debt for commercial operations. He also mentioned the proposal by Republican Governor Ron DeSantis of Florida to reduce local property taxes, which would be beneficial to cities, towns, and school districts if guaranteed by AAA-rated state governments. He stated that without the backing of state governments or alternative sources of income, eliminating property taxes would lead to bond defaults and cause "significant political consequences."