Northern Tax-Exempt Fund Posts Slight Negative Return in Q1

Northern Funds' Intermediate Tax-Exempt Fund posted a slightly negative return in the first quarter of 2026. Global equities fell 3% over the same period, according to the fund's quarterly commentary. The fund's managers said fixed-income returns were dragged down by pressure from both interest rates and credit spreads.

Treasury yields rose during the quarter. Inflation stayed stubborn and the economy held up, the commentary said. Credit spreads widened on fiscal policy uncertainty. That combination squeezed most fixed-income sectors, including municipal bonds.

The fund invests in investment-grade municipal bonds with intermediate maturities. Intermediate bonds generally carry less interest rate risk than longer-term issues, which helped cushion the fund's performance relative to longer-duration peers, the managers said. The fund's duration positioning aligns with its benchmark, according to the commentary.

The managers said the portfolio is positioned for a gradual decline in rates later in the year, though they acknowledged the uncertainty in the outlook. The fund's slightly negative return contrasted with the deeper equity selloff. The full commentary from Northern Funds is available on the firm's website.