State and local tax revenues sank in April, yet we believe most governments have strong fiscal positions, with ample reserves and budget flexibility to manage the decline.
Higher yields, wider credit spreads, and other common market reference metrics suggest relative valuations for muni bonds have become attractive.
Their track record in periods of rising interest rates suggests municipal bonds could be well-positioned for this year’s market environment.
Restructured debt has often outperformed the broader municipal bond market as issuers emerge from bankruptcy with higher debt-servicing capacity.
We believe the municipal markets should remain strong into 2022, although the good news may already be baked into high quality bond valuations.
Political change, continued fiscal support will drive municipal markets in 2021, although outcomes are likely to vary.
In a challenging year dominated by the COVID-19 pandemic, the municipal market is recovering on the strength of unprecedented federal support.
Municipal bond investors will need to contend with the impact of monetary policy on market prices.
Weak technicals are creating an opportunity in long-duration municipal bonds.
Liquidity could remain challenged, but valuations may be attractive for long-term investors.
Muni issuers are increasingly refinancing tax-exempt munis in the taxable market, but both areas offer potential benefits.
Rising issuance of munis available only to qualified institutional buyers (QIBs) may offer higher yields to investors who can access them.
We see several areas of opportunity for muni investors in the second half of 2019.
The current U.S. economic expansion is now the second-longest in the postwar era, and while it may have more room to run, we believe a recession is likely over the three- to five-year horizon. As U.S. taxpayers think about positioning their portfolios, we see three key reasons why the tax-exempt municipal market may be attractive late in the cycle.
Munis may offer U.S. taxpayers key benefits as they contemplate the end of the economic expansion.
We expect policy will continue to drive municipal bond markets in 2018, if more constructively than in 2017. Municipal investors may remember 2017 as the year of unrealized policy fear. While the threat of tax reform and its potential to reduce the value of the muni exemption for retail investors loomed large, ultimately it had little impact on individual municipal bonds.
How we’re positioning muni portfolios for turbulence – and the opportunities it may create.
An active approach to the complex, fragmented municipal bond market may help investors avoid several common drawbacks of passive strategies.
The tax-exempt municipal market has faced some challenges this fall: Yields trended higher in early October as the market struggled to digest the largest new issuance period of the year, and the indigestion has only increased following last week’s U.S. election outcome.