This podcast is being brought to you by John Hancock Investment Management Distributors LLC, member FINRA, SIPC. The views and opinions expressed in this podcast are those of the speakers, are subject to change as market and other conditions warrant, and do not constitute investment advice or a recommendation regarding any specific product or security. There is no guarantee that any investment strategy discussed will be successful or achieve any particular level of results. Any economic or market performance information is historical and is not indicative of future results, and no forecasts are guaranteed. Investing involves risks, including the potential loss of principal.

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John

Hello and welcome to the Portfolio Intelligence podcast. I’m your host, John Bryson, head of investment consulting and education savings at Manulife John Hancock Investments. Today is October 31st, 2025. So, happy Halloween to everybody, and I’ve got Adam Weigold, senior managing director and head of municipal securities at Manulife Investment Management on the podcast.

So, I thought that I needed to come up with a really compelling start to this to talk about muni bonds and the fact that it’s Halloween. So I went on AI, and I came up with the following. Welcome to the Portfolio Intelligence podcast, where we uncover the tricks and treats of the municipal bond market. No spooky surprises here. Just smart strategies, smart market insight, and a few ghostly trends haunting investors this season. Grab your pumpkin spice and let’s carve into today’s topic. Hey, Adam, what do you think of my intro?

Adam

Oh, boy, John, I think you got to work on that. I’d stick to your own personal writing rather than the AI from now on. I’m not getting into the spooky bond market stuff today.

John

Not loving it. I’m not getting a giant candy bar at your house. I’m using an apple this Halloween season.

Adam

I bet, yeah, toothbrush. Something like that.

John

Exactly. Well, Adam, thanks for coming on. I do want to talk about the muni market. I do think it’s an overlooked part of the market, and you’ve been investing there for years. So, I think you’ve got some great insight to share with our listeners. But before we jump in, tell me a little bit more about yourself, your career path, and what got you interested in the muni market.

Adam

Yeah, so I graduated in 1998 and was actually placed into munis. I think, like a lot of muni practitioners, you don’t come out of college hoping to get into the municipal bond market. But, you know, I got into it and stayed there, and I really enjoy it. I think it’s an interesting market, it’s very inefficient. It’s a market where if you do your homework, I think you can outperform. And so, I spent about 10 years as a research analyst and then the last 17-18 years as a portfolio manager. Came over to John Hancock four years ago to take over their muni department and, you know, improve performance, build the team out, build the product lineup out, and it’s been fantastic.

John

Awesome. No, we’re thrilled to have you and the experience that you have. In any conversation I’ve had with you, I’m always learning something new.

So, Adam, I mentioned at the beginning that muni bonds are sometimes an overlooked part of the market. Why should investors have tax-free munis in their portfolio?

Adam

Yeah, I think municipal bonds work well for investors who are looking for tax-free income, and that’s really what it comes down to. And I think, stability in your portfolio using munis helps offset the volatility of your equity holdings and really, less correlation to your equity holdings. And particularly if we’re going into a recession here or you think things are going to slow down, munis tend to perform a little bit better than other fixed-income from a spread standpoint as things get weak in the economy. And really, I think investors, they use munis not necessarily to get rich—your big total returns are going to come out of your equity portfolio—but to keep you rich and provide a long-term income stream that’s going to kick out that tax-free income for the investor.

John

Very good. So, let’s bring the conversation into what’s going on in the muni market this year. Can you walk us through what’s been going on?

Adam

Yeah, I mean, it’s been quite a year in the muni space—a little bit of a surprise in how things have played out. When we’ve kind of looked at the year as the turned last year and looked out, our view was probably that this was going to be a coupon-clipping year. Where we are now actually proves that out, but I think how we got here was quite a bit different than what we thought…a really weak performance in munis at the beginning of the year. In fact, through July, munis had significantly underperformed corporates and Treasuries. We’ve had a very strong run in the last two to three months here, and returns are looking solid, and looking kind of what we thought they were going to be, which is about your coupon, maybe a little bit better. But really, what hit us earlier in the year was supply. So…excess supply this year. significantly higher than last year, and that’s on top of a year in 2024 when we saw an increase in supply too. And supply is really just bonds being issued in the market—how many bonds, projects being funded—and what has happened and what we’re seeing is a lot of projects that got delayed during COVID got pushed out and are finally getting funded. And really just the infrastructure needs of this country are being funded through the municipal market, and costs have gone up significantly. So, labor costs and material costs. We talked to construction managers, and a lot of the very large construction managers are frankly busy with other projects like AI and data infrastructure, and things like that, that are probably more profitable than building roads and bridges. So, the costs there have gone up.

In addition to that, we actually had a kind of a scare at the beginning of the year. And I think the thought that the muni tax exemption might go away under the tax bill actually scared a lot of folks out of our market or maybe pushed them from making new investments. And you know, that didn’t come to be, and so what we had in in March and April, which were really the biggest months of underperformance for munis, we had a lot of issuance but you didn’t have a lot of flows coming into mutual funds, ETFs, and SMAs. So, a supply and demand problem. We haven’t really recovered from that until the last two or three months when supply lightened up a bit, and you’re starting to see flows, really solid flows back into our market. And seasonality has had an impact, and some of the idiosyncratic events that have occurred at different times…excess supply. We actually saw quite a bit of higher-ed supply, if you remember, the administration had threatened some of the colleges around the country with their tax-exempt status. So, we saw a lot of issuers trying to get into the market before there were potentially any issues. The supply and demand didn’t line up, but it is now, and we’ve had a nice rally.

We still have a ways to go to get in line with corporate bonds and Treasuries from a return perspective. But generally, we see solid November and December returns if we look back historically. We’re looking forward to hopefully having good flows and lower supply as we go into year-end. We hope to kind of make up some of the deficit between munis and corporates from a total return standpoint.

John

So, listening to you, it’s obviously in a complicated market, an opportunity for active managers to find opportunities. When you think about managing portfolios, because you run a number of them, how do you think about investing? What sets you apart?

Adam

Yeah, I think for us, we’re active managers, and that kind of sets you apart in the muni space. Munis have traditionally been a buy-and-hold asset class where individuals buy bonds and they hold them and the bonds mature or they get called and they buy another one. For us, I think we’re a little bit different that we take an active approach and you know seeing it as a dynamic market and we want to be opportunistic and active, and dynamic as well.

So, what does that mean? It means active trading and opportunistic use of credit in our portfolio. Looking for catalysts in the market where we can add total return. You know, so credit. From a credit standpoint, we may toggle up and down our credit exposure. So, bonds in the double-B, triple-B, or single-A range—we may increase or decrease those as spreads compress or widen.

And then we’re always looking at where we think the market is going and what people are going to want six months or a year down the road…and we want to be buying those bonds beforehand and selling them into demand at some future date. So, it’s a lot of that…a lot of opportunistic kind of moving around, and maybe, trading in and out of sectors. If a certain sector has performed very well, we’ll move out of that sector and move into a sector that we still like from a credit standpoint but maybe the credit spreads haven’t tightened significantly and we think there is some juice to be squeezed in that certain sector.

And just looking at the maturity curve and where we want to sit. You know, do we want to be short, intermediate, long…and where is the best place on the curve? We don’t really make, I would say, big interest rate calls, but we will look at the curve and kind of see where to take risk and what the best spots on the curve are and where there’s some value. And I think by moving your portfolio into those areas where there is potential upside, you can add total return. Most of our investors, I think they’re looking for tax-exempt income. That’s first and foremost, and we want to provide that. But on top of that, we want to add a layer of total return, and we do that by being, I would say, opportunistic and active.

John

Excellent. Building on opportunistic, what do you think are the three biggest opportunities in the muni market today?

Adam

Yeah, I think the muni market in general right now is offering a really attractive yield. So historically, we’re seeing yield levels that are fairly high, and as the Fed starts to cut rates and potentially yields move down across the curve, you could potentially see some good total return out there. We’re trying to find the spaces for that. So, entry point is a huge determinant of your long-term return—what yield you buy in at—and we’re looking attractive, in my opinion, now.

Digging into that a little bit, we like the intermediate to long space. Our curve is very steep, so you get a lot of income as you move out the curve. We don’t want to be too long because there’s quite a bit of volatility out there, but that kind of long intermediate space looks attractive. The curve is very steep.

And then, credit. So, as you move down the credit curve, what we’ve seen this year is, actually, in the muni space, that credit spreads have widened out a little bit. If you look at corporates—corporate bonds and corporate high yield specifically—the credit spreads there are at all-time tights. So, we think that there is room in the credit space for spreads to tighten, and that space has underperformed high grade year-to-date by a decent amount. I think there’s room to move there.

If you look even deeper into that, the types of bonds that are available and what we think adds value—bonds subject to Alternative Minimum Tax (AMT). There are a lot of people who don’t buy bonds subject to AMT, and you get additional spread there. Low coupon bonds and sectors—we like airports. If you’ve been to an airport, every airport in the country is doing construction. New terminals are going up, or old ones are being rehabbed. There’s a lot of debt out there that’s being issued, and they tend to have to issue it at wider spreads. But airports tend to be relatively high grade, pretty consistent in their revenue sources, and air travel is back to pre-COVID levels and they’re financially doing well.

So, we like anything where we can find additional spread in, like the underlying credit or the underlying structure, that’s where we’ll move in. I think intermediate to long, high yield, and certain sub-sectors of the market offer some opportunities, and that’s where we’re moving.

John

Excellent. So, we talked a lot about the muni market. We learned a lot along the way. Adam, thanks so much for being on the podcast. I very much appreciate it. Our audience does too.

Folks, if you want to hear more, please subscribe to the Portfolio Intelligence podcast on iTunes or wherever you find your favorite podcast or our website. There you can also find viewpoints on macro trends, portfolio construction ideas, alternatives, a number of business-building ideas, and much, much more. As always, thanks for listening to the show.

John

This podcast is being brought to you by John Hancock Investment Management Distributors LLC, member FINRA, SIPC. The views and opinions expressed in this podcast are those of the speaker, are subject to change as market and other conditions warrant, and do not constitute investment advice or a recommendation regarding any specific product or security. There is no guarantee that any investment strategy discussed will be successful or achieve any particular level of results. Any economic or market performance information is historical and is not indicative of future results and no forecasts are guaranteed. Investing involves risks, including the potential loss of principal.

Municipal bond prices can decline due to fiscal mismanagement or tax shortfalls, or if related projects become unprofitable. Duration measures the sensitivity of the price of bonds to a change in interest rates.