Federated Municipal High Yield Advantage Fund (B) FMOBX

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

Highlights

  • The fund’s total return for Institutional Shares during the third quarter was 0.10% versus 0.50% 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 increased with Treasury yields amid the continued strong U.S. economic expansion and further tightening of monetary policy by the Federal Reserve (Fed). Municipal Market Data (MMD) 2-, 10- and 30-year AAA tax-exempt yields increased by 33, 12 and 25 basis points, respectively. Yields on 2-, 10- and 30-year Treasury securities increased by 29, 20 and 22 basis points, respectively. During much of the quarter, losses in emerging markets and U.S. trade policy risks seemed to restrain Treasury yields from rising. Near the end of the quarter, each of these risks eased—emerging market performance improved and the U.S. reached a new trade agreement with Canada and Mexico—allowing generally strong U.S. economic data and the ongoing Fed policy normalization to drive U.S. bond yields higher.

The S&P Municipal Bond Index posted a loss of 0.14% for the quarter. The 3-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 Institutional Shares during the third quarter was 0.10% versus 0.50% 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 Local General Obligation, Public Power and Tobacco Settlement bonds
  • The fund’s duration was short compared to the sub-index, which helped the fund’s performance as rates rose during the quarter
  • Good performance in individual credits such as the Puerto Rico Electric Power Authority and the city of Chicago also boosted the fund’s return

Performance Detractors

  • The fund’s positioning on the yield curve, particularly at the longer end, detracted from performance
  • Lagging sectors included Hospital, Senior Care, and Airport 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.