Federated Municipal Bond Fund, Inc. (A) LMSFX

Share Classes Product Type Asset Class Category
Mutual Fund Fixed Income Muni National
As of 09-30-2018

Highlights

  • Performance was driven by the fund’s allocations to lower quality debt and revenue bond sectors of the market such as transportation revenue bonds.

Looking Back

Municipal bond yields increased with Treasury yields amid the continued strong US economic expansion and further tightening of monetary policy by the Federal Reserve. Municipal Market Data (MMD) 2-, 10- and 30-year AAA tax-exempt yields increased by 33, 12 and 25 basis points (bp), respectively. Yields on 2-, 10- and 30-year Treasury securities increased by 29, 20 and 22 bp, respectively.   During much of the quarter, losses in emerging markets and US trade policy risks seemed to restrain US Treasury yields from rising. Near the end of the quarter, each of these risks eased--Emerging Market performance improved and the US reached a new trade agreement with Canada and Mexico—allowing generally strong US economic data and the ongoing Fed policy normalization to drive US bond yields higher.

The S&P Municipal Bond Index posted a loss of 0.14% for the quarter. The three-year component of the index returned -0.02%. The 10-year component returned +0.10% and the portion of the index maturing in 22 years and longer returned -0.51%. The AAA- and A-rated components of the index were down 0.30%, 0.13%, respectively, while the BBB-rated component returned +0.24%. The S&P Intermediate Municipal Bond Index was down 0.01%. The S&P High Yield Municipal Bond Index returned 1.07%, but rose 0.48% when excluding outperforming Puerto Rico bonds.

Performance

The fund’s total return for A shares at net asset value during the third quarter was -0.46% versus -0.19% for the S&P Municipal Bond 3 year plus 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. Performance does not reflect the maximum 4.5% sales charge for Class A Shares. If included, it would reduce the performance quoted.

Click the Performance tab for standard fund performance.

Performance Contributors

  • Fund over weights to bonds rated “BB” and “BBB” municipal debt.
  • The fund’s shorter duration relative the benchmark.
  • The fund’s overweight to transportation revenue bonds versus the benchmark.

Click on the Portfolio Characteristics tab for information on quality ratings.

Performance Detractors

  • The fund’s underweight to state and local general obligation debt.
  • The fund’s holdings of longer maturity bonds which underperformed as rate rose over the period.

Looking Ahead

The fund maintains a shorter duration relative to its benchmark. A higher portfolio allocation to bonds rated in the “A”, “BBB” and High yield rating categories. Also, the fund is emphasizing the Transportation, Senior Care and dedicated tax sectors of the municipal market.