Franklin California Tax-Free Income Fund Q3 2025 Commentary
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Franklin Templeton4.62K FollowersFollow5ShareSavePlay(5min)CommentsSummaryOver the quarter, Franklin California Tax-Free Income Fund underperformed its benchmark, the Linked Bloomberg Muni Bond California Exempt/Muni Bond Index.In the third quarter of 2025 (Q3), new issuance of municipal (muni) bonds exceeded the average seen in the past few years, driven by a 34% year-over-year surge in July issuance.Overweight allocation to muni bonds with no external credit rating, security selection in AA rated bonds and underweight allocation to muni bonds with two to 10 years to maturity. chiewr/iStock via Getty Images Key Takeaways Markets: In the third quarter of 2025 (Q3), new issuance of municipal (muni) bonds exceeded the average seen in the past few years, driven by a 34% year-over-year surge in July issuance. By quarter end, the yield on the benchmark 10-year US This article was written byFranklin Templeton4.62K FollowersFollowFranklin Resources, Inc. [NYSE:BEN] is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 150 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the company offers specialization on a global scale, bringing extensive capabilities in fixed income, equity, alternatives and multi-asset solutions. With more than 1,300 investment professionals, and offices in major financial markets around the world, the California-based company has over 75 years of investment experience and over $1.4 trillion in assets under management as of June 30, 2023. For more information, please visit franklintempleton.com and follow us on LinkedIn, Twitter and Facebook.Quick InsightsWhat drove FCAVX's underperformance versus its benchmark in Q3 2025?Underperformance was primarily due to overweighting non-rated bonds, suboptimal security selection in AA and A rated bonds, and underweighting 2–10 year maturities.How does the current muni bond environment support FCAVX's forward outlook?Attractive tax-adjusted valuations and multi-year high yields support compelling income opportunities, but increased supply and moderating tax revenues heighten the need for credit selectivity.What portfolio positioning does FCAVX emphasize for future performance?FCAVX prioritizes overweighting long-duration munis and disciplined bottom-up research to identify relative value and preserve portfolio quality amid a challenging environment.Recommended For You