In 2015, the municipal bond market benefited from the favorable combination of three positive influences that have historically driven performance: supply, demand and credit quality. We see these positive influences likely to continue in 2016.

In our opinion, the governor’s wishes to restructure Puerto Rico’s debt will likely be very difficult—and expensive—to realize.

Municipal bonds are used to fund the public works projects that affect all of us every day. For many everyday investors (not just the wealthy) seeking to generate income in retirement, we think municipal bonds are worth considering.

Rafael Costas and Sheila Amoroso, Co-Directors, Municipal Bond Department, Franklin Templeton Fixed Income Group offer some fresh perspective on ongoing developments in Puerto Rico, including a new Act that was signed into law there.

The municipal bond market faced a rather tough year in 2013, with news of troubles in Detroit, Puerto Rico and elsewhere scaring off some investors. This year hasnt exactly been smooth sailing for the muni market either, but the waters seem a bit calmer and many investors have returned to the sector. Rafael Costas, Co-Director, Municipal Bond Department, Franklin Templeton Fixed Income Group, could be called cautiously optimistic about the muni market. He provides an update on some key market developments, including progress in the aforementioned trouble spots.

Municipal bonds faced some ups and downs in 2013, falling victim to Fed taper speculation and negative press that dogged Detroit and Puerto Rico and understandably scared off some investors. Sheila Amoroso and Rafael Costas, co-directors of our Municipal Bond Department, note that while there are still some issues to work through and even despite the sometimes-shocking headlines, not all news in the world of munis is bad news. They say investors need to get back to the basics and re-examine the reasons for investing in municipal bonds.

The markets have been in fits since mid-May, when Federal Ben Bernanke planted the seed that the central banks prolonged asset buying program would start winding down. Many investors were gripped with irrational panic, a so-called taper tantrum that roiled equity and fixed income markets. Rafael Costas, senior vice president and co-director of our municipal bond department, believes the early summer swoon sweeping the muni markets is unfounded and should be temporary, but the core reason for investing in the sector remains solid: long-term tax-free income potential.

In the realm of municipal bonds, if you had been focusing on the bankruptcy filings or threats facing a few California cities that dominated the news headlines earlier this year, you couldn't have been blamed for concluding that the sector was a minefield. But then, as year-end approached, the state and local government story became more upbeat, and investors were flocking to the municipal market. Rafael Costas, co-director of the Franklin Municipal Bond Department, has ridden this kind of headline carousel before and he's used to seeing these types of stories cycle through.

It's easy to jump to conclusions based on shocking headlines and dire predictions. If that's all you read, you'd probably be walking around with a stiff neck from looking up, waiting for the sky to fall. Beneath the sensational headlines often lies a more mundane story. This could be the case with the current bout of muni-bond default mania, which harkens back to the muni-market panic in December 2010.