Allspring Strategic Municipal Bond Fund — Q3 2025 Commentary

During the third quarter of 2025, municipal markets were shaped by evolving rate expectations, steady primary issuance and a continued focus on credit fundamentals. Against this backdrop, the Allspring Strategic Municipal Bond Fund navigated a market environment characterized by higher short-term yields and occasional volatility along the long end of the curve. Demand from tax-aware investors remained an important support for municipals, even as relative value comparisons to taxable alternatives shifted with Fed guidance and macroeconomic data.

The fund’s strategy emphasized selective sector exposure and active duration management. Portfolio managers maintained a measured duration posture to limit sensitivity to further rate moves while seeking to capture attractive tax-exempt yields where they believed compensation for interest-rate and liquidity risk was sufficient. Credit quality remained a central consideration: the team favored issues with stable revenue profiles and resilient local government finances, while remaining cautious on lower-rated credits in sectors facing structural pressures.

Primary supply during the quarter increased modestly, driven by refinancing activity and some large issuer issuance. The fund participated selectively in new issuance when spreads and relative value metrics aligned with the team’s underwriting criteria. Liquidity management also remained a priority, with the portfolio preserving capacity to capitalize on dislocations and tactical opportunities.

From an attribution perspective, security selection in essential-service and general-obligation paper contributed positively, while positioning against a steepening yield curve modestly detracted in periods when long rates eased. The team continued to employ credit research to identify issuers with improving fundamentals and to avoid those with weakening metrics.

Looking ahead, the outlook for municipal bonds rests on the interplay between federal policy, taxable market moves and state and local fiscal trends. The fund remains positioned to balance tax-exempt income generation with prudent risk controls: maintaining diversified holdings, monitoring duration exposure, and applying rigorous credit analysis. Investors should view the portfolio as actively managed to adapt to shifting market conditions while seeking to preserve tax-efficient income over a multi-year horizon.

As always, prospective and current shareholders should consult the fund’s prospectus and periodic reports for detailed holdings, fees and risks.