Perspectives Blog

Compelling opportunity in municipal bonds

Catherine Stienstra, Senior Portfolio Manager | November 7, 2013

nicipal 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 bonds, a historically steep yield curve, defaults at their lowest level since 2009, increasing tax revenues and high income tax rates make municipal bonds a compelling investment opportunity. Third quarter 2013 was a roller…

The taxman cometh

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

New and higher taxes will increase what many owe Muni bonds can help mitigate your tax bill Muni yields are attractive vs. many other investment options With tax season fully upon us, many Americans are about to realize the harsh realities of the new tax environment that came into effect January 2013 with the passage of the oddly named American Taxpayer Relief Act of 2012 and the introduction of taxes associated with the Affordable Care Act (A…

The perils and pitfalls of buying individual municipal bonds

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

Volatile ratings leave retail investors at risk Retail investors could pay higher prices Deck is stacked against retail investors With an increasing focus on the benefits of owning municipal bonds — attractive after-tax yields, low historical default rates and relatively low volatility — investors are again considering purchasing individual muni bonds. But the deck may be stacked against the retail investor. The allure of owning individual bon…

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

Why invest in long-term muni bonds? Why investors should focus on tax-free income and total return Many investors fled the muni market in 2013, as $60 billion in mutual fund redemptions attests. Particularly hard hit were longer-maturity funds, likely due to investors anticipating higher interest rates and the negative impact that would have on fixed-income investments, especially longer bonds. While such concerns appear rational, is avoiding…

Trouble in paradise: Q&A about Puerto Rico bonds

Chad Farrington, CFA, Head of Municipal Bond Research | 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 turbulent ride

Michael Taylor, Senior Municipal Analyst | September 26, 2013

Puerto Rico’s economic contraction and fiscal decline is persistent, well-documented and widely acknowledged within the municipal marketplace. For Puerto Rico, continued access to affordable capital remains imperative for the maintenance of fiscal operations, liquidity, and maintaining investment-grade agency credit ratings. We maintain the opinion that investing in Puerto Rico municipal bonds remains appropriate only for investors who can tole…

Gut check: The outlook on fixed income

Colin J. Lundgren, CFA, Head of 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…