Perspectives Blog

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

…well. Looking over the past 30 years, the trailing two-year total return of municipal bonds (using the Barclays Municipal Bond Index as a proxy for longer muni bonds) was negative only once for a brief two month period. While munis occasionally have had a negative year, they have generally been consistent performers over time. On a valuation basis, long munis have become more attractive as 30-year yields ended the year at 107% of Treasury yields,…

Fear is not a strategy

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

…f defaults has trended down since 2010 and is on track to be significantly lower again this year. Given this improving story, we believe that most fears regarding widespread credit deterioration are overblown. We also believe munis can be a prudent choice for investors seeking competitive returns and tax-exempt income. Summing up Despite attractive after-tax yields and improving credit fundamentals, fear is keeping many muni investors on the sid…

Gut check: The outlook on fixed income

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

…municipal bonds? Maybe not first, but should win a medal. Municipal bonds suffered with most other high-quality fixed-income sectors in 2013. The asset class tends to have longer durations so rising rates can be challenging. Munis also suffered from negative headlines (such as Detroit, Puerto Rico) and persistent outflows. But the underperformance of the sector appeared excessive to us. Any fixed income asset class that has duration warrants som…

Tri-state pension reforms result in improvements

Matt Stephan, Analyst, Tax-Exempt Fixed-Income Research | April 11, 2014

The New York, New Jersey and Connecticut tri-state region is dependent upon New York City. The strength of state pension systems varies. Improvements are being implemented. The New York-New Jersey-Connecticut tri-state region is, in large part, economically rooted in New York City — access to diverse, high-paying jobs throughout the metro area drives state property wealth and income metrics that rank among the top in the country. However, diff…

Municipal market ghosts of past, present and yet to come

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

December 3, 2013 — a seminal day in muni pension discussion. Ghost of Christmas Past – good times were had by all. Ghost of Christmas Present – sobering reality as negotiations continue to go nowhere. Ghost of Christmas Yet to Come – rising above the Detroit debacle. In the annals of public finance history, December 3, 2013, will likely be remembered as a seminal day in which the nature and direction of debate about large unfunded pensio…

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…

High-cost colleges beware

Beth Ware, Senior Municipal Bond Analyst | August 20, 2013

High-cost colleges beware: newly cost-sensitive students may pressure your business model. Municipal bond investors should be aware that certain categories of universities are likely at greater risk of credit rating downgrades. We remain concerned with universities that do not have a strong balance sheet, revenue flexibility and/or reputation to compete long-term in an industry where revenue growth is projected to be stagnant. The cost of high…