Franklin New York Intermediate-Term Tax-Free Income Fund experienced an underperformance against its benchmark, the Linked Bloomberg New York Muni Bond/10-Year Muni Bond Index, during the third quarter of 2025.
This relative underperformance was largely attributable to the fund's specific yield curve positioning, particularly its lower allocation to municipal bonds with maturities of 20 years or more. Additionally, the fund's strategy of maintaining an overweight position in BBB-rated bonds contributed to the drag on its returns. Despite these factors, the broader municipal bond market continues to present attractive valuations, especially when evaluated on a tax-adjusted basis. Current yields are at multi-year highs, providing investors with significant income potential.
The current market landscape offers a robust environment for fixed-income investors to secure favorable yields. The ongoing attractiveness of municipal bonds, coupled with the opportunity to lock in high income streams, suggests a positive outlook for investors seeking tax-advantaged returns. Through meticulous research and careful security selection, it is possible to uncover value and maintain a high-quality portfolio, even as the economic environment shifts and tax revenues moderate.