Federated New York Municipal Income Fund (A) NYIFX

Share Classes Product Type Asset Class Category
Mutual Fund Fixed Income Muni State Specific
As of 09-30-2017

Municipal Bond Market – Q3 2017

Treasury yields rose modestly during the third quarter of 2017 amid indications of improving U.S. and global growth, heightened prospects for stimulative U.S. tax policy and the beginning of gradual balance-sheet reduction by the Federal Reserve. Continued low inflation and bouts of risk aversion related to potential conflict between the U.S. and North Korea offered countervailing downward pressure on market yields during the quarter. Two-year Treasury yields increased by 10 basis points, while 10- and 30-year Treasury yields both increased by 3 basis points. Municipal bond yields followed a similar pattern, with steady inflows into municipal bond funds and modest new issuance supporting some outperformance for short- and intermediate-term municipal bonds relative to Treasuries. Municipal Market Data (MMD) 2-year AAA tax-exempt yields decreased 6 basis points, while 10- and 30-year AAA tax-exempt yields increased by 1 and 5 basis points, respectively.

The S&P Municipal Bond Index posted a return of 0.99%. The 3-year component of the index returned 0.61%, the 10-year component returned 1.18% and the portion of the index maturing in 22 years and longer returned 0.86%. The AAA/Aaa component of the index returned 0.72%, the A-rated component returned 1.46% and the BBB-rated component returned 2.08%. The S&P Intermediate Municipal Bond Index posted a return of 1.07%. The S&P High Yield Municipal Bond Index posted a loss of 0.08%, but rose 2.26% when excluding sharply underperforming Puerto Rico bonds.

New York Market Environment

New York is the third largest U.S. state by population and has a large and diverse economy with high per capita income and a gross state product of over $1.2 trillion. The state has a well-below-average leverage position with respect to its pension liabilities. The state-implemented pension reforms in 2012 for all new employees, which raised the retirement age, increased employee contributions and increased the number of years included in the calculation for final average salary on which pension benefits are based. New York followed a number of strong management practices, including multi-year financial planning and consensus revenue forecasting. The state had a long record of late budget adoption but passed its budget on time for almost every year of the last decade. The performance of the financial-services industry is very important to New York’s credit profile. The state’s finances are highly sensitive to income tax payments from the wealthy and to employment in the high-paid securities industry, which are centered in New York City.

Performance

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 rated in the higher rating categories (or unrated bonds of comparable quality) of the NYIG3 Index. Bonds in the noninvestment-grade category, below “BBB,” outperformed the higher rating categories relative to the index and contributed positive excess return. The fund’s overweight position, relative to the NYIG3 Index, in “BBB” (or unrated comparable quality) debt during the quarter 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 NYIG3 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.

Strategy

The fund maintained a higher portfolio allocation to Toll Roads, Higher Education and Resource Recovery revenue bonds than the benchmark. These higher allocations positively impacted the fund’s performance due to the outperformance of these sectors relative to the NYIG3 Index. The fund had larger allocations to Hospital and Industrial Development revenue bonds than the NYIG3 Index. These sectors underperformed the NYIG3 Index during the quarter and provided negative excess return relative to the NYIG3 Index.


Key Investment Team