Taxable municipal bonds: Finding new growth

With holdings of US taxable municipal bonds by non-US investors doubling since 2009, according to Federal Reserve data, the municipal debt market in the United States has indeed become global since the end of the financial crisis. In this paper, Taxable municipal bonds: Finding new growth after the financial crisis, Greg Gizzi, a senior portfolio manager and head of municipal bonds, examines traits of this part of the debt market, post-financial crisis programs that set the stage for increased global interest particularly offshore, and various catalysts that may spark continued growth.

Download the paper

IMPORTANT RISK CONSIDERATIONS

Past performance does not guarantee future results.

The views expressed represent the Manager's assessment of the market environment as of February 2019, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager's views.

Diversification may not protect against market risk.

Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.

Fixed income securities may also be subject to prepayment risk, or the risk that the security’s principal value may be prepaid prior to maturity at the time when interest rates are lower than what the bond was paying. A portfolio may then have to reinvest at a lower interest rate.

High yielding, non-investment-grade bonds (junk bonds) involve higher risk than investment grade bonds.

Market risk is the risk that all or a majority of the securities in a certain market — like the stock market or bond market — will decline in value because of factors such as adverse political or economic conditions, future expectations, investor confidence, or heavy institutional selling.

Investment strategies that hold securities issued by companies principally engaged in the infrastructure industry have greater exposure to the potential adverse economic, regulatory, political, and other changes affecting such entities. Moody’s Investors Service is a nationally recognized statistical rating organization. Standard & Poor’s Financial Services is a nationally recognized statistical rating organization. Fitch Ratings is a nationally recognized statistical rating organization.

This document may mention bond ratings published by nationally recognized statistical rating organizations (NRSROs) Standard & Poor’s, Moody’s Investors Service, and Fitch, Inc. For securities rated by an NRSRO other than S&P, the rating is converted to the equivalent S&P credit rating. Bonds rated AAA are rated as having the highest quality and are generally considered to have the lowest degree of investment risk. Bonds rated AA are considered to be of high quality, but with a slightly higher degree of risk than bonds rated AAA. Bonds rated A are considered to have many favorable investment qualities, though they are somewhat more susceptible to adverse economic conditions. Bonds rated BBB are believed to be of medium-grade quality and generally riskier over the long term.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

The Bloomberg Barclays US Corporate Investment Grade Index is composed of US dollar-denominated, investment grade, SEC-registered corporate bonds issued by industrial, utility, and financial companies. All bonds in the index have at least one year to maturity.

The Bloomberg Barclays Taxable Municipal Index is a rules-based, market-value-weighted index engineered for the long-term taxable municipal bond market.

The Bloomberg Barclays Long US Corporate Index is composed of US dollar-denominated, investment grade, SEC-registered corporate bonds issued by industrial, utility, and financial companies. All bonds in the index have at least 10 years to maturity.

All third-party marks cited are the property of their respective owners.

Subscribe

Subscribe to hear from our portfolio managers and analysts on trending topics

I'm interested in hearing from:
Or select:

Subscribe to Insights

Thank you for your subscription!

Top insights