As investors in municipal markets, it is easy to be narrowly focused on your local town, county, school district—or painfully aware of State credit issues. It is however, rewarding knowing you’re putting money into the economies around you. That said, the economy is global and it is important to be aware of macro issues, both domestic and international, that may affect your portfolio if you are not in the “buy and hold” camp of muni buyers. With any fixed income product, yields and prices move in opposite directions and effects on the interest rate markets change the value of your holdings, either positively or negatively. Two of the larger macro stories in the past two weeks have been the Fed and their decision regarding the US economy and short term rates, and then, there’s the situation in Greece.

On the domestic front, on June 17th, the Federal Open Market Committee met and issued their latest policy statement. Piggybacking off of previous statements, the Fed suggests that economic activity has been expanding and little has changed since the 1st quarter of 2015. The forecast dots used by the Fed to imply economic projections were slightly dovish in nature with Fed Chair Janet Yellen stating that the economy still has “room for further improvement”. On a rate basis, the Fed changed nothing at this point but the expectations of the Committee census were for two rate hikes in 2015, with the first anticipated at the September meeting. Post meeting, the US Treasury bond market continued to rally with rates in the long end of the curve declining 5 basis points and the belly of the curve seeing a 13bps drop.

How does this translate to the muni market? Well, seasoned investors know that there is not always a direct corollary between Treasuries and Munis. At times, the overall movements in yields do follow direction but not in absolute terms, with a key example being a decrease in 30 year municipal rates last week, but to a lesser degree than Treasuries. Further, any increase in short-term rates can have an effect on the borrowing costs of municipalities. With refunding issuance making up the lion’s share of bond sales so far this year, an increase in rates would help damper already muted 2015 total issuance projections.

On the International front, the ongoing issues in Greece continue to play-out in international markets and through the news headlines. As of June 25th, Eurozone finance ministers ended further meetings this week without any agreement from Greek officials. The hourglass is quickly emptying with Greece set to default on a payment to the International Monetary Fund by next Tuesday. In direct contrast to the rally in Treasuries and Muni rates last week, the Greek drama has had the opposite effect on US interest rate markets.

How does this translate to the muni market? There is always the fear of widespread contagion from a Greek default on its debt. However, there seem to be many willing parties at the table to try and get a deal done. The current effect on rates here in the US has been an average rise of 4bps throughout the MMD scale, which means prices on munis have decreased. If there is no deal worked out, then most likely there will be a flight to quality issue and US Treasuries and by proxy munis, will rally as demand chases prices higher.

Whether you are “buy and hold” or looking for total return, it is always good to be informed and know how global news items may affect your portfolio.

While a Fed rate hike or a Greek default will not directly cause a state or local issuer to miss a payment, the larger idea of note is to understand what is in your portfolio from a credit perspective and be confident in knowing why your portfolio may experience price fluctuations. In this connected economy, every piece of news, positive or negative, has a direct impact on your portfolio.