Displaying items by tag: munis

(New York)

Those who only pay causal attention to muni bonds might be scared away from the market by negative stories about big buildups in debt, bankruptcies, and a general erosion in credit quality. However, this year, nothing could be further from the truth. There has been a massive deleveraging of the sector in 2018, with total US muni bond issuance down a whopping 17% to-date, and on pace for 25% by the end of the year. The dearth of issuance has pushed yields down and prices up. “It’s a seller’s market”, says one muni bond analyst.

FINSUM: Part of the lack of new issuance is due to the federal tax changes, but nonetheless, the market is looking increasingly healthy.

(New York)

One of the most popular fixed income assets for wealthy US investors are municipal bonds. Their tax exempt status has made them continually popular, but what will their fate be during a period of rising rates? There are currently fears that tax cuts and rising rates will wound the sector, but one top financial advisor says the muni sector “will retain its rightful position as a place where wealthy Americans protect their wealth”. Despite rising rates there will be lower issuance this year, which will protect the sector. Additionally, tax cuts for the wealthy will be modest, and not really enough to damage munis. “They will still be a relative value compared with other fixed-income, high-grade asset classes”.

FINSUM: We suspect munis will continue to have a high degree of demand, and if issuance stays low, then those are two important supportive factors. However, some municipalities are facing big budget and pension issues, which could pose a risk.

(New York)

With stocks riding so high and anxiety building about a potential downturn, espousing and building a robust bond strategy is going to be more important than ever. With that in mind Barron’s has put out four bond funds picks for 2018. The picks are the Vanguard Tax-Exempt Bond Index, the Artisan High Income fund, the Prudential Short Duration Muni High Income, and the Dodge & Cox Global Bond.

FINSUM: The Vanguard fund really caught our eye. It has an expense ratio of 0.19% versus an average of 0.8% for its peers, and has more than $190 bn under management, with a lot of expertise managing it.