Bloomberg Barclays US Aggregate Bond Index

Each year, Bloomberg Barclays publishes a report on individual calendar year returns for municipal bonds. The results for the past 25 years are shown in the Bloomberg.

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UNDERSTANDING MUNICIPAL MARKET INDICES, The Bloomberg Barclays Municipal Bond index are categorized into four sector types: taxable municipal bonds.

Political dysfunction characterized by significantly delayed budgets and large non-recurring financial solutions have given rise to multi-notch rating agency downgrades, and there's the threat of more to come. While overall muni default levels remain very low, we believe the negative media reports emanating from these pension-funding challenged states and localities may begin to inaccurately reflect on the muni market in general. Remember Meredith Whitney's 60 Minutes interview in predicting a wave of muni defaults that never happened?

Well, in the past, these broad-brush perceptions of the muni market have resulted in periods of outflows and encouraged investors to demand more return for the risk they're taking.

It's a challenging dynamic for investors, who are tempted to move away from an entire asset class that still has a lot of opportunity, when really they need to move away from a few weak state and local municipalities with pension problems.

Typical of fixed-income securities, the price of a municipal bond will generally go down when interest rates rise. But municipals are often less sensitive to interest rate changes than many people believe. Municipal bonds, as represented by the Bloomberg Barclays Municipal Bond Index, have produced positive returns in 30 of the last 34 years.

This isn't surprising given the long-term secular decline in interest rates since the early s. What is surprising is that the year Treasury rate rose in 13 calendar years during that same period from the beginning of the year to the end of the year. What's more is the Bloomberg Barclays Municipal Bond Index recorded negative returns in only three of those years , and We've often heard the axiom that when the Fed is raising rates, you should stop investing in fixed income or invest in shorter-duration bonds that have less sensitivity to interest rates.

But that rings somewhat hollow for municipal bonds. Despite this overall resiliency, short, intermediate and long maturity muni bonds will react differently during periods of rising rates - and sometimes contrary to what one might expect. Beginning in and continuing through , the Fed raised the federal funds rate 16 times. Yet, over that same period, the best-performing muni securities were those with the longest maturities as the yield curve flattened the expectation may be that those with the shortest maturities performed the best.

The information will be conveyed on trade confirmation statements, and specific information will be provided on the cost to the customer, the cost to the firm and the relative difference between those prices - essentially, the statements will identify the profit the firm is making on each trade. In contrast to brokerage firms, which buy bonds for their inventory and then earn a profit when selling those same bonds to clients, institutional managers, such as mutual funds which are not in the business of earning a profit on their trading operations, purchase the bonds and put them directly into the portfolios at no markup to investors.

We believe that the requirements of this rule will make it apparent to retail investors that transaction costs for municipal bonds, especially small odd lots, are significantly higher than those for comparably sized equity trades. We believe there are still good opportunities in muni bonds, despite the challenges this market is facing. The after tax returns could differ after year end tax adjustments are accounted for. The Index is comprised of tax-exempt municipal securities issued by states, cities, counties, districts and their respective agencies.

A general obligation bond is secured by the full faith and credit of its issuer. The municipal market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issuers of municipal securities.

Interest rate increases can cause the price of a debt security to decrease. A portion of the dividends you receive may be subject to federal, state, or local income tax or may be subject to the federal alternative minimum tax. Non-diversified funds that focus on a relatively small number of securities tend to be more volatile than diversified funds and the market as a whole. Passively managed funds hold a range of securities that, in the aggregate, approximates the full Index in terms of key risk factors and other characteristics.

This may cause the fund to experience tracking errors relative to performance of the index. ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns. Before investing, consider the funds' investment objectives, risks, charges and expenses. To obtain a prospectus or summary prospectus which contains this and other information, call , download a prospectus or summary prospectus now , or talk to your financial advisor.

Read it carefully before investing. To obtain a prospectus or summary prospectus which contains this and other information, call , download a prospectus or summary prospectus now, or talk to your financial advisor. This information provided is calculated by Bloomberg Finance L. Neither SSGA nor its affiliates assume any liability for or guarantee the timeliness, accuracy and completeness of the information provided.

The information provided is as of the date indicated and is subject to change. This analysis or any portion thereof may not be revised or changed in any way, reprinted, sold or redistributed without the written consent of SSGA. This cash flow table and the data contained herein together, "Content" is provided for informational purposes only, on an "as is" basis.

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Average Maturity The market value-weighted average maturity of the bonds and loans in a portfolio, where maturity is defined as the stated final for bullet maturity bonds and loans. Current Yield A bond's annual return based on its annual coupon payments and current price as opposed to its original price or face. Yield to Maturity The market weighted average rate of return anticipated on the bonds held in a portfolio if they were to be held to their maturity date. All indices listed are unmanaged indices and do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in a fund.

Certain indices may take into account withholding taxes. An index's performance is not illustrative of a fund's performance. Indices are not securities in which investments can be made.

The Bloomberg Barclays Municipal Bond Index is considered representative of the broad market for investment grade, tax-exempt municipal bonds with a maturity of at least one year.

Bonds and bond funds will decrease in value as interest rates rise. Additional risks include credit, interest rate, call, reinvestment, tax, market and lease obligation risk.

High-yield municipal bonds are subject to greater risk of loss of income and principal than higher-rated securities, and are likely to be more sensitive to adverse economic changes or individual municipal developments than those of higher-rated securities. Municipal bonds may be less liquid than taxable bonds. The income generated from some types of municipal bonds may be subject to state and local taxes as well as to federal taxes on capital gains and may also be subject to alternative minimum tax.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a fund carefully before investing.

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