Legg Mason - Western Asset Current Market Muni Portfolios

Legg Mason / Bond

09-04-2015

Executive summary

• The municipal ("muni") market posted a positive return during the first quarter, as interest rates declined and fundamentals generally improved.

• While new muni issuance picked up during the quarter, it was matched with solid demand.

• An underweight to pre-refunded bonds, along with overweights to the education and water & sewer sectors contributed to performance.

• An overweight to the leasing sector, coupled with underweights to industrial development revenue and transportation sectors, detracted from performance.

• In the short term, Western expects modest weakness in the muni market due to seasonal factors, as investors look to fund their tax obligations. But they believe this may trigger opportunities to identify good investment values.

• The rally over the last 12 months has resulted in a more fully valued muni market. However, Western still sees many attractive opportunities in the muni market.