| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 5.1% | -0.04% | -0.04% |
American Century's California High-Yield Municipal Fund declined 0.04% in Q1 2026, outperforming its benchmark which fell 1.00%. Surging interest rates in March drove the quarter's decline, with municipal bond yields rising faster than Treasury yields. The volatile period included renewed tariff concerns, Federal Reserve policy pause, mixed economic data, war in Iran, and soaring oil prices that fueled inflation worries. Sector allocations drove outperformance, particularly an underweight position in underperforming industrial development revenue securities and overweights in special assessment and charter schools sectors. Security selection also aided performance across hospital, special assessment, local general obligation, retirement community, and water/sewer sectors. The managers have modestly tempered their economic outlook due to energy shocks but still expect improvement from late 2025, with growth settling around 2% annually. Given tight valuations, they remain cautious and selective, favoring seasoned credits with financial flexibility while seeing attractive value in energy prepay, multifamily housing, and development district sectors.
Focus on high-yield California municipal bonds while maintaining cautious selectivity given tight valuations, favoring seasoned credits with financial flexibility and targeting attractive value in energy prepay, multifamily housing, and development district sectors.
The managers expect the economy to improve from late 2025 but have modestly tempered their outlook due to energy shocks. They anticipate economic growth to settle at approximately 2% annualized pace with steady capital spending and stable labor market. They expect continued strong municipal bond issuance and believe supply/demand dynamics should remain favorable.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 22 2026 | 2026 Q1 | - | California, credit, duration, high yield, interest rates, municipal bonds | - | California high-yield municipal fund outperformed despite rate-driven decline, benefiting from sector allocation and security selection. Managers maintain cautious stance given tight valuations, favoring seasoned credits with financial flexibility. Economic outlook modestly tempered by energy shocks but expect 2% growth. Target attractive value in energy prepay, multifamily housing, and development districts. |
| Jan 23 2026 | 2025 Q4 | BCHIX, BCHYX, CAYAX, CAYCX | California, Credit quality, energy, high yield, infrastructure, municipal bonds | - | California high-yield munis delivered solid Q4 returns supported by favorable technicals and Fed easing. Portfolio outperformed through strategic sector positioning in industrial development revenue and energy prepay bonds. Robust $580 billion municipal issuance in 2025 reflects strong infrastructure demand. Managers remain constructive on tax-exempt income opportunities despite potential fiscal policy headwinds for select sectors. |
| Oct 24 2025 | 2025 Q3 | - | California, credit, duration, Fed, high yield, municipal bonds | - | California high-yield munis rebounded in Q3 2025 driven by Fed rate cuts and attractive valuations. The fund's longer duration positioning and sector allocation boosted performance, though security selection detracted. Credit spreads widened among high-yield securities. Management expects stable credit fundamentals despite economic slowing and maintains cautious positioning given tight valuations. |
| Jul 23 2025 | 2025 Q2 | - | California, credit, Federal Reserve, high yield, municipal bonds, rates | - | California high-yield munis rebounded in Q3 2025 driven by Fed rate cuts and attractive valuations. The fund's longer duration positioning and sector allocation to industrial development revenue bonds boosted performance. Managers expect stable credit fundamentals despite economic headwinds, favoring structured securities over credit risk while targeting development districts and essential services sectors. |
| Mar 31 2025 | 2025 Q1 | - | California, credit, high yield, municipal bonds, rates, tax policy | - | California municipal bonds declined modestly in Q1 2025 amid interest rate volatility and concerns about tax policy changes. The fund underperformed due to yield curve positioning favoring longer maturities and sector allocation challenges. Managers expect economic slowdown but maintain bias toward higher-quality securities with duration overweight, waiting for better opportunities given valuation and policy uncertainties. |
| Sep 30 2024 | 2024 Q3 | - | California, Fed, high yield, infrastructure, Municipal, rates | - | California High-Yield Municipal Fund returned 2.89% in Q3 2024, benefiting from falling yields and Fed rate cuts. Security selection detracted but duration positioning and sector allocation aided performance. The fund maintains quality focus with long duration bias, expecting continued Fed easing into mid-2025 while waiting for better credit opportunities. |
| Jun 30 2024 | 2024 Q2 | - | California, Credit quality, Federal Reserve, high yield, interest rates, municipal bonds | - | California municipal bond fund outperformed through sector allocation favoring charter schools and student housing while avoiding state general obligations. High-yield munis significantly outperformed investment-grade as credit spreads tightened. Managers maintain quality bias expecting economic slowdown, await better credit opportunities given tight valuations, and position for potential Fed rate cuts by year-end. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
RatesSurging interest rates in March largely drove the quarter's decline in California municipal bonds. Most municipal bond yields rose at a greater pace than Treasury yields, causing munis to underperform. The yield curve steepened during the period. |
Interest Rates Yield Curve Treasury Municipal Bonds Duration |
InflationWar in Iran and soaring oil prices fueled inflation worries during the quarter. Higher energy prices may offset some positive effects from fiscal stimulus, leading to a modestly tempered economic outlook. |
Oil Prices Energy Fiscal Stimulus Economic Growth | |
| 2025 Q4 |
OilThe region's long oil exposure contributed to meaningful underperformance relative to MSCI EM Index in 2025. The outlook for 2026 suggests a continuation of lower oil prices, which remains a headwind for MENA markets. |
Oil Energy Commodities |
AIThe region's under-representation in the AI theme resulted in meaningful underperformance relative to MSCI EM Index in 2025. The outlook for 2026 suggests sustained capital flows toward AI-linked assets, continuing to be a headwind for MENA markets. |
AI Technology Capital Flows | |
Capital MarketsCapital market relevance continues to be a priority for regional governments. This should translate into a broadly supportive market environment, characterized by investor-friendly policies and improved market investability. |
Capital Markets Policy Investability | |
Infrastructure SpendingThe recalibration of ambitious giga-projects in Saudi Arabia signals a more pragmatic approach to capital spending and resource allocation. This shift enhances policy credibility, which is essential for building investor confidence and ensuring sustainable public finances. |
Infrastructure Saudi Arabia Policy | |
| 2025 Q3 |
Credit StressMunicipal credit spreads generally widened for the quarter, more significantly among high-yield securities. High-yield municipal bond returns advanced but underperformed investment-grade munis for the quarter. The fund remains cautious towards spreads given valuations are tight. |
Credit Spreads High Yield Valuations Municipal Bonds |
RatesMunicipal bond yields generally declined at a greater rate than Treasury yields, particularly at the longer end of the yield curve. A Federal Reserve rate cut helped support munis. Duration positioning, which was slightly longer than the index's, boosted performance. |
Interest Rates Fed Duration Yield Curve | |
| 2025 Q2 |
RatesFederal Reserve rate cuts helped support municipal bonds in the third quarter. Municipal bond yields generally declined at a greater rate than Treasury yields, particularly at the longer end of the yield curve. The managers expect credit fundamentals to remain stable despite a slowing economy due to restrictive monetary policy effects. |
Federal Reserve Rate Cuts Yield Curve Monetary Policy Interest Rates |
Credit StressMunicipal credit spreads generally widened for the quarter, more significantly among high-yield securities. High-yield municipal bond returns advanced but underperformed investment-grade munis. The managers remain cautious towards spreads given valuations are tight and favor securities with attractive structures over those that add credit risk. |
Credit Spreads High Yield Investment Grade Valuations Credit Risk | |
| 2025 Q1 |
RatesInterest rate volatility drove municipal bond returns lower in March, pushing investment-grade munis into negative territory for the quarter. While Treasury yields declined for the quarter, most municipal bond yields rose, driving muni-to-Treasury ratios higher. The fund's yield curve positioning, which favored longer-maturity securities, weighed on results as longer-maturity municipal bond yields increased. |
Interest Rates Yield Curve Duration Treasury Volatility |
Credit StressStates face funding uncertainty with potential challenges looming from changes to Medicaid funding and federal budget negotiations that could disrupt fiscal stability. Rating downgrades slightly outpaced upgrades in the quarter, though defaults remained rare. The slowingeconomy and uncertainty surrounding the federal budget may present headwinds for municipal credit. |
Credit Quality Downgrades Medicaid Federal Funding Fiscal Stability | |
Trade PolicyConcerns about future tax policy and federal spending cuts weighed on the municipal market. Issuers pushed deals forward ahead of potential tax policy changes, with first-quarter municipal bond supply soaring to more than $111 billion. The fund maintains focus on select sectors while waiting for better opportunities given municipal valuations and fiscal policy debate, including discussions about munis' tax-exempt status. |
Tax Policy Federal Spending Tax Exempt Supply Issuance | |
| 2024 Q3 |
Infrastructure SpendingMunicipal supply continued to grow during the quarter as large infrastructure-related deals came to market. In September, gross issuance neared $45 billion, a 54% year-over-year increase. Issuers took advantage of more-stable interest rates while some pushed deals forward to avoid volatility around the presidential election. |
Infrastructure Municipal Issuance Supply Deals |
RatesFalling Treasury yields, moderating inflation and a hefty Federal Reserve rate cut supported the broad fixed-income market. The Fed is eyeing a soft landing with the course of future easing moves unclear amid persistent inflation and mixed economic data. The fund expects Fed rate cuts to continue into mid-2025. |
Fed Rates Yields Easing Monetary | |
| 2024 Q2 |
Credit StressMunicipal credit spreads tightened during the quarter, particularly among lower-quality securities. High-yield municipal bonds advanced and significantly outperformed investment-grade munis. The fund maintains a bias toward higher-quality securities given expectations for economic growth to slow. |
Credit Spreads High Yield Municipal Bonds Credit Quality Investment Grade |
RatesRising Treasury yields pressured most fixed-income securities during the quarter. The Fed remains cautious on rate cuts until confident core inflation can reach the 2% target. Policymakers are expected to proceed cautiously, likely cutting rates at least once by year-end. |
Interest Rates Federal Reserve Treasury Yields Rate Cuts Monetary Policy | |
InflationPersistent inflation and an uncertain Federal Reserve rate-cut timetable pressured fixed-income securities. The backdrop improved in June on moderating inflation. Inflation remains the wildcard for Fed policy decisions. |
Core Inflation Price Pressures Fed Policy Economic Data Monetary Policy |
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