Federated Michigan Intermediate Municipal Trust (A) MMIFX

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

Muni 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.

The Michigan Market

During the third quarter, spreads on Michigan general obligation bonds tightened by 1 to 6 basis points relative to the AAA national benchmark of similar maturity provided by MMD, which publishes the yields of high-grade tax-exempt bonds daily. The greatest tightening occurred from 6 to 10 years. According to the Bond Buyer, the issuance of new Michigan bonds during the third quarter was $1.1 billion, a decrease of 85% compared to the third quarter of 2016. Year-to-date issuance has declined 57% from 2016.

Performance

During the third quarter of 2017, the fund’s total return at net asset value (NAV) for Class A shares was 0.56%. For the quarter, the fund’s best-performing sectors were Airports, Dedicated Tax and Pre-Refunded bonds (bonds for which the principal and interest payments are secured or guaranteed by cash or U.S. Treasury securities held in an escrow account). Lagging sectors were Water & Sewer, Higher Education and Other Revenue bonds. The fund’s modified duration increased slightly during the quarter, but remained short compared to its 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. 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.

Strategy

During the third quarter of 2017, the fund’s manager continued to believe income likely would be the primary long-term driver of total return. Transactions during the period generally focused on managing duration, sector rebalancing and cash flow.