Federated Michigan Intermediate Municipal Trust (A) MMIFX

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

Highlights

  • The fund’s total return for the quarter was -0.22% for A Shares at net asset value
  • The fund’s duration and yield-curve positioning contributed to performance during the quarter as rates rose.
  • The fund’s duration remains short to its index; credit allocation is concentrated in higher-rated securities

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.

During the quarter, spreads on Michigan general obligation bonds were unchanged relative to the AAA national benchmark of similar maturity provided by MMD, which publishes the yields of high-grade tax-exempt bonds daily. According to the Bond Buyer, issuance of new Michigan bonds in the quarter was $1.5 billion, an increase of 24% from a year earlier. Year-to-date issuance within the state is down 9% from the first half of 2017.

Performance

The fund’s total return for A Shares at net asset value (NAV) during the third quarter of 2018 was -0.22%.

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. 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 3% sales charge for Class A Shares. If included, it would reduce the performance quoted.

Click the Performance tab for standard fund performance.

Performance Contributors

  • The fund benefitted from its short duration and positioning along the yield curve
  • The fund’s best-performing sectors were, Pre-Refunded, Public Power and Dedicated Tax bonds
  • The fund’s underweight position in BBB-rated bonds also contributed positively

Performance Detractors

  • Lagging sectors included Higher Education, Airport and Hospital bonds
  • The fund’s overweight in AA-rated bonds was a drag on performance

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

How We Are Positioned

The fund’s duration remains short to its index. Credit allocation is concentrated in higher-rated securities.