Municipal bonds have performed well so far in 2016 as evidenced by the nearly three percent return in the iShares National Muni Bond ETF (MUB) . And a lot of that performance results from good old supply and demand, said David Dowden, portfolio manager from MacKay Municipal Managers. Demand in the municipal market has been significant with year-to-date mutual fund inflows of $33 billion through June. So far this year, there has been $221 billion in new issuance through June 2016 with 60 percent of that new issuance representing refinancings and advanced refundings. 'We believe technical factors will continue to play a heightened role in driving returns in 2016,' said Dowden. The year began with heightened market volatility in January and February. The Brexit referendum lifted economic uncertainty further, perpetuating choppiness in global markets. That market uneasiness has generally benefited muni-bond holders.
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