Perspectives Blog

What’s the outlook for muni bonds?

James Dearborn, Head of Municipal Bonds | June 19, 2014

…earth of new supply and a resurgent demand by investors seeking attractive taxable-equivalent yields. We believe municipal bonds should continue to perform well in the second half of 2014. Yields on muni bonds are compelling when considering the impact of taxes on non-exempt securities. As we reach the halfway point of 2014, it’s a good opportunity to review our full-year outlook for the municipal bond market and consider what the second half of…

The taxman cometh

James Dearborn, Head of Municipal Bonds | March 13, 2014

…to the NIIT Higher taxes and a growing antipathy toward them are powerful forces behind the renewed interest in municipal bonds. While municipal bonds have performed well since the beginning of the 2014, we continue to believe that they make sense for tax-sensitive, income-oriented investors. After taxes, municipal bonds make sense Today’s municipal bond yields look compelling, especially for high tax bracket investors. If an investor takes the…

The perils and pitfalls of buying individual municipal bonds

James Dearborn, Head of Municipal Bonds | February 27, 2014

…ds and other institutional investors with dedicated credit research teams are constantly identifying and selling bonds with potential credit problems prior to rating agency downgrades. These securities are typically sold to unsuspecting retail investors who only become aware of the credit problems after the bonds are downgraded, which frequently results in negative price movement. Truly, the retail municipal bond buyer faces a daunting task when…

Don’t throw the baby out with the bath water – The case for long muni bond funds

Catherine Stienstra, Senior Portfolio Manager | January 29, 2014

…federal income tax rate is 43.4%, resulting in many investors taking home barely 56 cents of each dollar earned. Municipal bonds can help investors keep more of what they earn, since the income may be exempt from local, state and/or federal income taxes. As tax rates move higher, investments that provide income exempt from taxes, such as municipal bonds, become more appealing. There was a significant increase in rates and steepening of the yield…

Hungry for income? High yield munis could be your meal ticket

Chad Farrington, CFA, Head of Municipal Bond Credit Research and Senior Portfolio Manager | May 28, 2014

…Many investors are concerned about the prospect of rising interest rates and the impact higher rates may have on bonds, especially since we’ve been in a very low rate environment for so long. While we believe that rates are likely to move higher at some point, the impact will not be the same across all bonds. We think high yield municipal bonds, with their high yields and opportunity for price appreciation, are one segment of the market worth con…

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

…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 shareholders — that is until Puert…

The case for active muni management

Kimberly Campbell, Senior Portfolio Manager | April 21, 2014

…es. In addition, munis have historically provided long periods of positive performance, as shown in the Barclays Municipal Bond Index chart below. Exhibit 1: Barclays Municipal Bond Index calendar-year returns Past performance does not guarantee future results. It is not possible to invest directly in an index. Source: Barclays, as of March 31, 2014. Munis are attractive for investors in high tax brackets Recently, the advantages of municipal bo…