Perspectives Blog

Detroit bankruptcy — One year later

Ty Schoback, Senior Municipal Analyst | August 18, 2014

…idered unsecured obligations and subject to impairment within the confines of Chapter 9. In the summer of 2013, Detroit filed the largest municipal bankruptcy in history. One year on, how has the filing played out and what insights can be gleaned? Detroit’s bankruptcy has not had negative systemic effects on the broader municipal market, as we ventured in our Making sense of Detroit’s bankruptcy filing  piece last summer. We continue to maintain…

Municipal market ghosts of past, present and yet to come

James Dearborn, Head of Municipal Bonds | December 9, 2013

…Yet to Come: Unfortunately, this vision of Christmas has already arrived in the form of downtrodden and bankrupt Detroit, with acres of abandon buildings, near non-existent public services and economic despair on every corner. Indeed, Christmas in Detroit looks bleak, and for employees and retirees the future looks bleaker as Judge Rhodes ruled that state guarantees of pension benefits could be trumped by U.S. bankruptcy court law. Surely, there…

Fear is not a strategy

James Dearborn, Head of Municipal Bonds | November 18, 2013

…ning of selling pressures. While yields look attractive, fear and uncertainty persist. It may take years for the Detroit/PR stories to play out and investors need to know how exposed their portfolios may be. Bankrupt Detroit Detroit’s fiscal erosion has been slow and painful. Decades of financial and economic decline, exacerbated by dysfunctional politics, resulted in the city’s Chapter 9 bankruptcy filing in July. With around 100,000 creditors,…

Compelling opportunity in municipal bonds

Catherine Stienstra, Senior Portfolio Manager | November 7, 2013

Municipal bond market movements have provided an attractive opportunity to lock in attractive yields. Although credit problems in Detroit and Puerto Rico made headlines, these issues are not representative of the broad municipal market — the number of municipal defaults is at its lowest level since at least 2009. With rising tax rates, the advantages of tax-exempt income can be considerable. Attractive yields vs. corporate and Treasury b…

Trouble in paradise: Q&A about Puerto Rico bonds

Chad Farrington, CFA, Head of Municipal Bond Credit Research and Senior Portfolio Manager | January 2, 2014

Why has Puerto Rico become such an issue now? Should investors be concerned with a downgrade or default? Is Puerto Rico a systemic risk for the municipal market? Historically, Puerto Rico (PR) bonds’ high yield and triple tax exemption (federal, state and local) had been a big lure for many institutional investors, such as mutual funds. PR debt exposure in municipal bond funds, namely single-state municipal bond funds, proved advantageous for sh…

Puerto Rico’s double-downgrade

Michael Taylor, Senior Municipal Analyst | February 10, 2014

What’s behind the downgrade of Puerto Rico’s credit ratings by Standard & Poor’s and Moody’s? The double-downgrade puts pressure on Puerto Rico to shore up its finances in the coming weeks A future default or debt restructuring could rattle investor confidence and impact all municipal market issuers On February 4, Standard & Poor’s lowered its long-term credit rating on the Commonwealth of Puerto Rico’s (PR) general obligat…

Gut check: The outlook on fixed income

Colin J. Lundgren, CFA, Head of U.S. Fixed Income | February 24, 2014

The next big move in rates may be triggered by concerns about possible future Fed rate hikes. High-quality bonds may struggle to generate coupon-like returns. Emerging markets may ultimately benefit from the synchronized uptick in growth in global developed markets. With nearly two months of the year behind us, we thought now would be a good time to see how the fixed-income market is faring in 2014 and assess our outlook. We asked our investme…