Municipal bonds
take center stage

In an uncertain bond market,
investors look to the potential
of municipal bonds

The renowned tax advantages of municipal bonds are just one of multiple features that may make this asset class attractive in the current market.

As the Federal Reserve continues to tread the line between curbing inflation and preventing recession, markets seem likely to remain volatile for the foreseeable future. This is precisely the type of environment in which municipal bonds may be well placed to prosper.

Through our investment firm, Insight Investment, BNY Mellon Investment Management is defining modern municipal bond investing by offering an institutional pedigree in seeking best risk-adjusted return opportunities.

Why choose municipal bonds?

While muni bond prices are feeling the price pressures of rising rates, along with other bond market sectors, there are five key reasons why an allocation in muni bonds may make sense amid higher rates.

Attractive income

Munis have the potential to offer appealing tax-equivalent yields compared to other fixed-income options – and have done so consistently.1

Returns performance

Over the past five years, munis have offered a similar return to US aggregate bonds.2

Diversification

With historically low default rates, munis have potential to offset volatility from higher-risk investments within a portfolio.

Tax exemption

Most munis are exempt from federal taxes; some are exempt from state and local taxes too.

Stability

Municipal bonds have experienced a significantly lower default rate than corporate bonds over the past four decades.3

Past performance is no guarantee of future results

Why is now the time for munis?

Like all fixed-income assets, munis were affected by the global uncertainty and inflationary pressures of early 2022, resulting in a rare sell-off. At the same time, issuers have continued to bring new large muni deals to market, reducing prices further.4

Muni’s relatively low correlations to rising interest rates and volatile markets may make them an especially attractive option at present, as inflationary pressures shrink the global economy.

Three reasons why Muni fundamentals remain compelling right now

  • Strong credit ratings across many states may mean reduced risk
  • States financial reserves have reached all-time highs of $195bn5 as a result of Federal stimulus and record tax receipts from 2021
  • Moody’s municipal rating activity during 2021 was the most positive since 2007

Approach

Spotlight: BNY Mellon Opportunistic Municipal Securities Fund

We believe the best way to preserve capital and earn consistent after-tax returns is to make precision-focused decisions to best risk-adjusted return opportunities. We employ proprietary systems designed for both taxable and tax-exempt fixed income markets.

Insight Investment employs deep specialist expertise in fixed income and institutional-level experience to seek out customized solutions for each investor to uncover value.

Our funds

BNY Mellon
Opportunistic Municipal
Securities Fund

Morningstar Analyst Rating

(277 funds rated)*

Class A PTEBX

The primary goal of the fund is to seek high current income exempt from federal income tax. In pursuit of that goal, it may allocate up to 30% of the portfolio in Municipal names rated below investment grade.

Morningstar Category:
Municipal National Intermediate

Morningstar Rating™ as of August 31, 2022 for the Class A class shares; other classes may have different performance characteristics. Overall rating for the Municipal National Intermediate category. Fund ratings are out of 5 stars: Overall 4 stars (277 funds rated); 3 Yrs. 3 stars (277 funds rated); 5 Yrs. 4 stars (241 funds rated); 10 Yrs. 4 stars (177 funds rated).

BNY Mellon
AMT Free Municipal
Bond Fund

Morningstar Analyst Rating

(277 funds rated)*

Class A DMUAX

The fund seeks as high a level of current income exempt from federal income tax as is consistent with the preservation of capital.
 
 

Morningstar Category:
Municipal National Intermediate

Morningstar Rating™ as of August 31, 2022 for the Class A class shares; other classes may have different performance characteristics. Overall rating for the Municipal National Intermediate category. Fund ratings are out of 5 Stars: Overall 3 Stars (277 funds rated); 3 Yrs. 2 Stars (277 funds rated); 5 Yrs. 3 Stars (241 funds rated); 10 Yrs. 4 Stars (177 funds rated).

BNY Mellon
High Yield Municipal
Bond Fund

Morningstar Analyst Rating

(193 funds rated)*

Class A DHYAX

The primary goal of the fund is to seek high current income exempt from federal income tax.
 
 
 

Morningstar Category:
High Yield Municipal

Morningstar Rating™ as of August 31, 2022 for the Class A class shares; other classes may have different performance characteristics. Overall rating for the High Yield Municipal category. Fund ratings are out of 5 Stars: Overall 3 Stars (193 funds rated); 3 Yrs. 2 Stars (193 funds rated); 5 Yrs. 3 Stars (169 funds rated); 10 Yrs. 3 Stars (107 funds rated).

Meet the team

DANIEL BARTON

Head of Research,
Municipal Bonds,
Insight North America, LLC

 

DANIEL RABASCO

Head of Research,
Municipal Bonds,
Insight North America, LLC

 

THOMAS CASEY

Senior Portfolio Manager,
Insight North America, LLC
 

 

JEFFREY BURGER

Senior Portfolio Manager,
Insight North America, LLC
 

 

About BNY Mellon Investment Management

BNY Mellon Investment Management is one of the world’s leading investment management organizations, encompassing BNY Mellon’s affiliated investment management firms and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the corporation as a whole or its various subsidiaries generally.

BNY Mellon Investment Management, through its investment firm Insight, provides investors with access to an institutional pedigree in seeking best risk-adjusted return opportunities for municipal investing.

Our strategies draw on more than 80 years of municipal investing history in seeking to deliver attractive after-tax returns to our investors.

About Insight Investment

Insight Investment is a leader in global fixed income, risk management solutions and absolute return investing. The senior members of its municipal bond investment team have over 25 years’ experience on average and have worked together for close to two decades. Innovative and agile, they are defining modern municipal bond investing by focusing rigorously on outcomes to deliver for clients regardless of market conditions.

Insight became an affiliate within the BNY Mellon multi-manager structure in 2009, and as part of the transition of fixed income teams from Mellon Investments, and introduced Efficient Beta, Municipals and Stable Value capabilities in 2021. Today, Insight is the largest BNY Mellon affiliate, responsible for over $1.1 trillion5 in assets under management across fixed income, liability driven investing and absolute return and unconstrained investing, and $25.4 billion6 in US Municipal assets.

1 https://www.pewtrusts.org/en/research-and-analysis/data-visualizations/2014/fiscal-50

2 Insight Investment () (municipal investment team) Portfolio Strategy Commentary as of January 2022.

3 Moody’s Investors Service as of December 2020, Average Corporate Debt Recovery Rates for senior unsecured bonds 1970–2020.This study evaluates the performance of Moody’s municipal ratings and their consistency with global corporate ratings. It covers public underlying ratings for all public finance issuers, including U.S. state and local governments, municipal utilities, not-for-profit hospitals, housing agencies, colleges and universities, as well as other municipal issuers with long-term debt ratings. It also includes certain infrastructure and project finance credits that are tracked in parallel in our infrastructure default study. Insured, enhanced, and letter of credit-backed ratings are excluded.

4 As of December 31, 2021. Includes employees of Insight North America LLC (INA) and its affiliates, which provide asset management services as part of Insight, the corporate brand for certain companies operated by Insight Investment Management Limited (IIML).

5 Source: Insight, as of March 31, 2022. Where applicable, assets include discretionary and non-discretionary assets, the notional value of overlay strategies, and assets managed by investment personnel acting in their capacity as officers of affiliated entities. 1 Variations in totals due to rounding. ¹Includes dedicated municipal portfolios and municipal securities included in multi-sector portfolios. 1 Assets under management (AUM) are represented by the value of the client’s assets or liabilities Insight is asked to manage. These will primarily be the mark-to-market value of securities managed on behalf of clients, including collateral if applicable. Where a client mandate requires Insight to manage some or all of a client’s liabilities (e.g. LDI strategies), AUM will be equal to the value of the client specific liability benchmark and/or the notional value of other risk exposure through the use of derivatives. Insight North America (INA) is part of ‘Insight’ or ‘Insight Investment’, the corporate brand for certain asset management companies operated by Insight Investment Management Limited including, among others, Insight Investment Management (Global) Limited, Insight Investment International Limited and Insight Investment Management (Europe) Limited. Advisory services referenced herein are available in the US only through INA. Figures shown in USD. FX rates as per WM Reuters 4pm spot rates.

6 Includes dedicated municipal portfolios and municipal securities included in multi-sector portfolios. See Important Information in disclosure statements.

* Source: Morningstar. The Morningstar Rating TM for funds, or "star rating," is calculated for managed products with at least 3-year history. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance (not including the effects of sales charges, loads and redemption fees if applicable), placing more emphasis on downward variations and rewarding consistent performance. Managed products, including open-end mutual funds, closed-end funds and exchange-traded funds, are considered a single population for comparative purposes. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its 3-, 5-, 10-year (if applicable) Morningstar Rating metrics. (c) Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from use of this information. Past performance is no guarantee of future results. Each fund represents a single portfolio with multiple share classes that have different expenses structures. Other share classes may have achieved different results. Ratings do not reduce investment risk and are subject to change.

 

Investors should consider the investment objectives, risks, charges, and expenses of a mutual fund carefully before investing. Download a prospectus, or summary prospectus, if available, that contains this and other information about the fund, and read it carefully before investing.

Bonds are subject to interest rate, credit, liquidity, call and market risks, to varying degrees. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes and rate increases can cause price declines. High yield bonds involve increased credit and liquidity risk than higher rated bonds and are considered speculative in terms of the issuer’s ability to pay interest and repay principal on a timely basis. Municipal income may be subject to state and local taxes for out-of-state residents. Some income may be subject to the federal alternative minimum tax for certain investors. Capital gains, if any, are taxable. Diversification cannot assure a profit or protect against loss.

The amount of public information available about municipal securities is generally less than that for corporate equities or bonds. Legislative changes, state and local economic and business developments, may adversely affect the yield and/or value of municipal securities. Other factors include the general conditions of the municipal securities market, the size of the particular offering, maturity of the obligation, and the rating of the issue. Income for national municipal funds may be subject to state and local taxes. Income may be subject to state and local taxes for out-of-state residents. Some income may be subject to the federal alternative minimum tax for certain investors. Capital gains, if any, are taxable.

Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the funds may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase a client’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.

The Morningstar RatingTM for funds, or "star rating", is calculated for managed products with at least a 3-year history. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance (not including the effects of sales charges, loads and redemption fees if applicable), placing more emphasis on downward variations and rewarding consistent performance. Managed products; including open-end mutual funds, closed-end funds and exchange-traded funds; are considered a single population for comparative purposes. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its 3-, 5-, and 10-year (if applicable) Morningstar Rating metrics. ©2022 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

Past performance is no guarantee of future results. The fund represents a single portfolio with multiple share classes that have different expense structures. Other share classes may have achieved different results.

Ratings do not reduce investment risk and are subject to change.

Investment advisory services in North America are provided by Insight North America LLC, a registered investment adviser and regulated by the U.S. Securities and Exchange Commission (SEC). Insight North America LLC is associated with other global investment managers that also (individually and collectively) use the corporate brand Insight Investment and may be referred to as "Insight" or "Insight Investment".

This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product and should not serve as a primary basis for investment decisions. Prospective investors should consult a legal, tax or financial professional in order to determine whether any investment product, strategy or service is appropriate for their particular circumstances. Views expressed are those of the author stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.

BNY Mellon Investment Adviser, Inc. Insight North America LLC (the funds’ sub-adviser) and BNY Mellon Securities Corporation, (distributor) are companies of BNY Mellon.

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