Commentary

History of Municipal Bond Defaults

Over the course of history, during world wars, pandemics, financial crises, and deep recessions, municipal bond defaults have been an extremely rare occurrence. There have been less than 700 rated municipal bond defaults in the over 100 years of public finance existence. As a point of comparison, we saw over 117 corporate defaults in 2019 alone.

Commentary

Best Performing Asset Class Over the Past 10 Years?

The dramatic recovery in fixed income markets, which began in Q1, persisted throughout the second quarter. Investors increasingly sought safe haven investments in light of geo-political uncertainty and perceived overvaluation in equity markets more broadly.

Commentary

April 2017 Market Commentary

“It was the best of times, it was the worst of times…” to borrow a phrase from Dickens’, Tale of Two Cities. As 2016 came to a close it seemed truly the best of times for many. Following the US election, there was renewed hope and optimism for growth initiatives, as well as public policies, which generated a sense of certainty and euphoria about the future.

Commentary

Municipal HY Attractive Relative to Corporate HY

Given the steady and significant compression of corporate high yield (HY) spreads/yields, I am forwarding the attached illustration depicting the ratio, or yield, of the Barclays Municipal HY Index relative to the Barclays Corporate HY Index.
Commentary

October 2013 Market Commentary

The Feds decision in September to maintain its policy of asset purchases, better known as Quantitative Easing (QE), caught the broader market by surprise. Fed tapering of QE was broadly expected to begin in September. The Feds decision to delay the reduction of QE pushed back the date upon which anticipated tapering would begin. This resulted in a meaningful rally in Treasury bond prices in September. To the surprise of many media pundits calling for ever higher interest rates, US Treasury yields ended October at 2.55%, virtually unc
Commentary

Muni Market Resurgent

In light of the recent recovery in fixed income markets and the outperformance of the municipal bond market in particular, I thought I would send a note to provide a brief update since we last sent our market observations in July and August. As you may recall, we stated in the clearest terms that we felt the recent rise in interest rates provided an attractive entry point for municipal bond investors.
Commentary

July 2013 Market Commentary

Fixed income investors have enjoyed a steady move higher in bond prices over the past five years. Given the consistency with which bond values have increased, it is understandable if bond investors were surprised by the just over 0.60%, or 60 basis point rise in ten year Treasury yields and corresponding movement down in bond prices during the second quarter.
Commentary

April 2013 Market Commentary

Interest rates rose modestly during the first quarter as ten year Treasury yields increased by approximately 0.10% or 10 basis points. Seasonal tax-time municipal bond liquidations, together with a heavier primary calendar, weighed heavily on the market causing municipal bond yields to underperform on a relative basis. In our recent market opinion we thoroughly discussed our view that the relative cheapening of municipal bonds presented investors with and attractive entry point as we expect technical conditions to improve as we move into the summer months.
Commentary

Municipal Market Presents Attractive Entry Point

Ten year Treasury yields, as recently as last week, were as high as 2.06% which compares to ten year Treasuries yields of 1.75% as of 12/31/12. As Treasury yields have drifted higher, due in part to heavier Treasury issuance and a perceived decline in market risk/volatility, municipal bond yields have risen in sympathy with Treasury yields. Having said that, at the time of the writing of this note, Treasury yields are once again lower and are now below 1.90%.
Commentary

January 2013 Market Commentary

The municipal bond market continues to perform well in the face of significant political, financial and economic uncertainty, once again, demonstrating the importance of consistent, competitive tax-free cash flow. Municipal bonds proved to be one of the best performing asset classes during 2012.
Commentary

November 2012 Market Commentary

In light of the approaching fiscal cliff and likely changes to the US tax code, we continue to believe that municipal bonds offer some of the most attractive risk- adjusted return potential available in the market today.
Commentary

August 2012 Market Commentary

On a year-to-date basis the municipal bond market has, once again, delivered meaningful returns both on an absolute and risk adjusted basis. While the market yield and or cash flow of a bond is typically very important to investors, it is equally important to remember that the income a bond produces is only one component of a bonds return. Investors must consider several other essential elements of a security to properly quantify a bonds relative value.
Commentary

4Q2011 Market Commentary

Tepid, albeit positive, economic growth, together with the Feds most recent statements that short-term interest rates will be kept low for at least the next two years, provides greater investor confidence in the recent stabilization of the municipal bond market as underlying credit conditions continue to improve. Current economic recovery remains weak, however. Material cuts in government spending over the next three to five years will likely further constrain growth. We, therefore, do not see a catalyst for significant domestic growth in the near-term.
Commentary

Clinton Investment Management 3Q2011 Market Commentary

As we look toward year-end, we endeavor to seek out the best means for adding meaningful value to our client portfolios. We expect municipal bond new issue supply to dissipate as we approach the New Year. As it does, we expect technical conditions to improve materially. We also believe that the roughly $20 billion in anticipated January reinvestment will pull demand for municipal bonds forward into December. We have extended our client durations modestly in an effort to capitalize on what we believe could be a period of solid outperformance for the municipal bond market.
Commentary

2011 First Half Review

While yields on tax-exempt municipal bonds are lower than they have been in some time, there remains a strong argument for investing in tax-free investments that deliver actual cash flow. In addition, given the municipal bond markets historically stable credit history, illustrated most recently by states and local governments demonstrated willingness and ability to make difficult choices in order to protect debt holders, we would argue that investing in municipal bonds today is particularly compelling given the opportunity to achieve attractive relative return.