Federated Ohio Municipal Income Fund (A) OMIAX

Share Classes Product Type Asset Class Category
Mutual Fund Fixed Income Muni State Specific
As of 03-31-2018

Looking Back

Municipal bond and Treasury yields climbed higher as the Federal Reserve (Fed) raised short-term target rates at its March meeting amid the ongoing U.S. economic expansion. Concern that the Fed may excessively tighten monetary policy and the prospect of escalating trade conflicts as the Trump administration proposed targeted tariffs caused stock markets to decline and Treasury and municipal yields to retrace somewhat from their highs during the quarter. The new issuance of municipal bonds fell about 30% during the first quarter compared to the same period last year as the acceleration of deals into the fourth quarter of 2017 to beat the tax legislation left a diminished calendar of financings. Demand for municipal bonds was somewhat muted as banks and insurance companies reacted to the large corporate tax cut by selling a portion of their municipal holdings. Also, individual investor demand for bonds and municipal mutual funds was muted as total returns turned modestly negative.

Yields on AAA-rated 2-, 10- and 30-year municipal securities increased 9 basis points, 44 basis points and 41 basis points, respectively. Yields on 2-, 10- and 30-year Treasury securities increased 38 basis points, 33 basis points and 23 basis points, respectively.

The S&P Municipal Bond Index posted a loss of 0.92%. The 3-year component of the index posted a return of 0.15%, while the 10-year component returned -1.58% and the portion of the index maturing in 22 years and longer returned -1.27%. The AAA/Aaa component of the index returned -1.14%, the A-rated component returned -1.08% and the BBB-rated component returned -0.65%. The S&P Intermediate Municipal Bond Index posted a return of -1.09%. The S&P High Yield Municipal Bond Index returned 1.29%, but rose 0.43% when excluding sharply outperforming Puerto Rico bonds.

Ohio Market Environment

Ohio is the seventh largest state by population in the U.S. and its gross domestic product per capita also ranks seventh among the states. Its economy remained stable and regained many of the jobs lost from the recession. Ohio’s job growth was below the national average after an initially strong post-recession recovery. The Manufacturing and Energy sectors showed some signs of softening, with better growth in Financial Services and Health Care during the reporting period. The state’s conservative budget management and continued growth have maintained solid financial performance and allowed for the absorption of several tax reforms that date back to fiscal year 2012. During the first quarter of 2018, Ohio maintained high levels of internal liquidity, moderate and affordable long-term liabilities and a statutory requirement to deposit year-end surplus revenues into a budget stabilization fund.


Investor appetite for yield in the low interest-rate environment increased municipal bond fund inflows and resulted in outperformance of bonds rated “BBB” (or unrated bonds of comparable quality) relative to bonds in the higher-rated categories (or unrated bonds of comparable quality) of the S&P Municipal Bond Ohio Index (OHIG3). Bonds in the non-investment-grade category, below “BBB,” underperformed those in the higher-rated categories. The fund’s overweight position, relative to the OHIG3 Index, in “BBB” (or unrated comparable quality) debt during the quarter had had a positive impact on its performance. The fund’s underweight in bonds rated “AAA” (or unrated bonds of comparable quality) also made a positive contribution to performance as bonds in this rating category underperformed the OHIG3 Index.

Performance quoted represents past performance which is no guarantee of future results.

To view performance current to the most recent month end and for after tax returns, click on the Performance tab.

Click the Performance tab for standard fund performance.

Click the Portfolio Characteristics tab for information on quality ratings.


The fund had a larger allocation to Pre-Refunded bonds, Industrial Development debt and Toll Road bonds than the OHIG3 Index. These sectors underperformed the OHIG3 Index during the quarter and provided negative excess return relative to the index. Pre-Refunded bonds are escrowed in Treasury securities until their most recent call date and have less sensitivity to changes in interest rates as a result. The fund maintained a higher portfolio allocation to Airport and Hospital revenue bonds. These allocations helped the fund’s performance due to the outperformance of these sectors relative to the OHIG3 Index.