Federated Municipal High Yield Advantage Fund (F) FHTFX

Share Classes Product Type Asset Class Category
Mutual Fund Fixed Income Muni National
As of 06-30-2018

Highlights

  • The fund’s total return for I shares during the second quarter was 1.13% versus 2.02% for the S&P 25% A and Higher/25% BBB/50% High Yield All 3-Year Plus Sub-Index
  • The fund’s duration remains short to the sub-index. Credit allocation remains slightly weighted toward higher quality due to a limited supply of attractive high-yield bonds.

Looking Back

Municipal bond yields were little changed, while Treasury yields moved higher amid continued U.S. economic expansion, somewhat higher inflation and another increase in short-term target rates by the Federal Reserve. Yields on 2-, 10- and 30-year Treasury securities increased by 26, 12 and 2 basis points, respectively. In contrast, Municipal Market Data (MMD) 2- and 30-year AAA tax-exempt yields each decreased by 1 basis point and the 10-year AAA tax-exempt yield increased by 4 basis points. Modest gross new issuance of municipal bonds combined with generally stable demand to support outperformance of municipal yields relative to Treasury yields. Gross new issuance of municipal bonds through June 2018 was down nearly 25% compared to the average level at midyear over the prior three years. The enactment of federal tax reform in 2017 accounts for much of the decline in new issuance this year. The federal tax bill eliminated tax-exempt advance refunding bonds and prompted a surge in municipal new issuance late last year, leaving a diminished calendar of financings.

The S&P Municipal Bond Index returned 0.91% for the quarter. The 3-year component of the index posted a return of 0.60%, the 10-year component returned 0.78% and the portion of the index maturing in 22 years and longer returned 1.39%. The AAA-, A- and BBB-rated components of the index returned 0.67%, 0.89% and 1.42%, respectively. The S&P High Yield Municipal Bond Index returned 2.99%, but rose 2.31% excluding Puerto Rico bonds.

Performance

  • The fund’s total return for I shares during the second quarter was 1.13% versus 2.02% for the sub-index

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than what is stated. Other share classes may have experienced different returns than the share class presented. 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.

Performance Contributors

  • The fund’s best-performing sectors were State General Obligation, Public Power and Tobacco Settlement bonds.
  • Performance also was enhanced by strong returns in individual names, including Puerto Rico Electric Power Authority.

Performance Detractors

  • The fund’s duration was short relative to the sub-index. With rates falling during the quarter, this was a drag on performance.
  • The fund’s positioning on the yield curve, notably an overweight in short-duration bonds, also detracted from performance
  • Lagging sectors included Toll Roads, Water & Sewer and Pre-Refunded bonds.

How We Are Positioned

The fund’s duration remains short to the sub-index. Credit allocation remains slightly weighted toward higher quality due to a limited supply of attractive high-yield bonds.