Unpacking the Q1 2025 Landscape for Tax-Exempt Bonds

Understanding the Fund's Performance in Early 2025

For the initial quarter of 2025, the NYLI MacKay Tax-Free Bond Fund recorded negative overall returns, lagging behind its primary comparative measure, the Bloomberg Municipal Index. The primary influences on the fund's performance stemmed from its strategic bond selections, particularly within the segment of bonds maturing in 15 to 20 years, and its specific investments in California state bonds. Additionally, the fund's heightened exposure to bonds yielding 5.25% or more in coupon payments acted as a drag on its returns.

Market Dynamics in the First Quarter of 2025

In contrast to the fund's experience, the broader market saw varied outcomes. Investment-grade tax-exempt indices, similar to the fund, posted negative total returns. However, high-yield tax-exempt and taxable municipal bond indices, along with other fixed-income sectors, managed to generate positive returns. Investors in municipal bonds encountered a complex environment marked by fluctuating interest rates and evolving supply-demand dynamics.