The May issue of our Bond Fund Intelligence, which will be sent to subscribers Thursday a.m., features the articles, "All About the Munis After April 15: Inflows, ETFs, Steep Curve," which reviews recent commentary on the tax-exempt bond market; and "ICI's 2026 Fact Book Reviews '25 Bond Fund Trends, Flows," which excerpts from the latest Investment Company Institute statistics compilation. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns rebounced in April while yields inched higher. We excerpt from the new issue below. (Contact us if you'd like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data.)
BFI's lead article states, "Just before and right after April 15, we normally see a spate of articles on municipal or tax exempt bonds and bond funds. A recent Vanguard piece, 'After Tax Day: A Fresh Look at Municipal Bonds,' quotes from Paul Malloy, Vanguard Head of Municipals, in a recent Kiplinger's interview. It states, 'April and Tax Day have a way of sharpening perspective. Even for those who planned ahead, a tax bill can inspire revised portfolio positioning for the years ahead.... Malloy argues that today’s municipal bond market deserves consideration. After a period when higher short-term yields drew attention to cash-like strategies, longer-dated municipal bonds are quietly offering something different: meaningfully higher income, attractive relative value, and tax-advantaged returns that can compound over time.'"
It continues, "The article says, 'One of the defining features of the current environment is the steepness of the municipal yield curve. Investors willing to extend maturity are being paid materially more to do so. It's a dynamic that, Malloy argues, stands out both historically and relative to taxable alternatives. For investors focused on after-tax outcomes rather than near-term yield alone, that steepness matters.'"
Our "Fact Book" article states, "ICI's new '2026 Investment Company Fact Book' contains a review of the bond fund marketplace in 2025 and a wealth of statistics on bond funds. They write, 'Net inflows into bond funds remained strong in 2025 at $1.3 trillion.... Investor expectations that central banks would continue lowering benchmark interest rates likely drove this demand. Monetary policy is important because when interest rates fall, bond prices rise, and vice versa. As such, fixed-income investors stand to gain from a reduction in interest rates. Historically, net flows of bond funds have been related to bond returns.... Hence, in a falling rate environment, investors may move more assets into bond funds.'"
It continues, "ICI's section on 'Bond Mutual Funds' ... explains, 'Bond mutual fund net new cash flows typically are correlated with the performance of US bonds ..., which, in turn, is largely driven by the US interest rate environment. In 2025, the 10-year Treasury yield exhibited marked volatility with an overall downward trend, concluding the year at 4.2%. This movement was primarily influenced by the Federal Reserve's interest rate cuts, as well as evolving expectations regarding inflation, the labor market, and economic growth.'"
Our first News brief, "Returns Rebound, Yields Up in April," states, "Bond fund returns jumped in April after declining in March. Yields inched higher. Our BFI Total Index rose 0.76% over 1-month and rose 5.39% over 12 months. (Money funds rose 3.88% over 1-year as measured by our Crane 100 Index.) The BFI 100 increased 0.62% in April and rose 5.15% over 12 mos. Our BFI Conservative Ultra-Short Index was up 0.38% over 1-month and 4.40% for 1-year; Ultra-Shorts rose 0.44% and 4.58%. Short-Term rose 0.51% and 4.28%, and Intm-Term increased 0.42% in April and rose 4.84% over 12 mos. BFI's Long-Term Index was up 0.45% and 4.80%. High Yield rose 1.07% in April and 8.02% over 12 mos."
A second News brief, "Federated Hermes Publishes, 'Bond Markets Change the Classic Narrative,' states, "Portfolio Manager Karen Manna writes, 'Fixed income investors have no shortage of choices. At the center of it all, though, sits the 'risk-free rate' -- US Treasurys.... What has been striking so far this year, however, is less about where Treasury yields are outright, and more about how they are behaving.... Instead of a classic risk-off bid into Treasurys, markets have leaned in a different direction. The dominant response has been 'inflation on,' not 'risk off.'"
Another brief says, "CNBC Says, 'JPMorgan's Head of Fixed Income ... Rising Rates Could be Next Big Market Threat.' JPM's Bob Michele comments, 'The central banks have made it clear that they've got to be vigilant against inflation. But I think we have to accept that the bond market's gone through a lot of repricing. If I look at the 10-year treasury, can it get 100 basis points away from the Fed funds rate in a neutral environment? Yeah, that puts you at 4.625%. So that's 20 basis points from here. It's not at 5%.'"
A BFI sidebar, "Morningstar on Best Shorts," says, "Morningstar writes that, 'Investors Are Flocking to Shorter-Term Bond Funds. These Are The Best Ones.' They comment, 'When it comes to bonds, investors are going short. Very short. According to the latest flows data, investors are specifically flocking to mutual funds and exchange-traded funds in the ultrashort bond category. In fact, March was a historic month for ultrashort-bond funds, which attracted their largest monthly inflow on record, $24 billion, representing over 85% of ... inflows.'"
Finally, another sidebar, "Vanguard's New BondBuilder," states, "A press release titled, 'Vanguard Launches BondBuilder Model Portfolio Suite,' explains, 'Vanguard ... announced the launch of a new suite of model portfolios constructed using Vanguard Target Maturity Corporate Bond ETFs (TMEs or BondBuilder TMEs), a lineup of 10 index ETFs designed to help investors build more precise and customizable fixed income portfolios.'"
