From Silver Creek AB: Well done Mira Loma PM! We wish you all the best in your future rounds, and perhaps one day we shall face each other again. Best of luck, and take care.
Hudson, Joshua. Municipal Bonds Provide A High Quality Income Alternative To Treasuries. Seeking Alpha. October 32, 2016//ab
https://seekingalpha.com/article/4017044-municipal-bonds-provide-high-quality-income-alternative-to-treasuries The municipal market provides a high quality alternative to treasuries for fixed income investing. Tax-exempt municipal bonds provide tax-free income, effectively increasing yield. There are multiple ways to add municipal bonds to your portfolio. The municipal bond market is a great way to add fixed income to a portfolio as an alternative to treasuries. Since the great recession, the municipal or "muni" market has grown to $3.8 trillion in debt outstanding. According to SIFMA, 42% of this debt was held by individual investors, 26% by mutual funds, 14% by banks, 13% by insurance companies, and the rest by other, possibly foreign, investors. This article will explore the benefits of investing in this interesting market. What is the muni market? In the most basic sense,the municipal market supports the development of municipalities which includes state and local entities. The local school board may need to build a new school in order to accommodate all of the students in the area. They will most likely access the muni market to finance their new school. To do this, they will issue a series of muni bonds. The muni market has helped finance roads, bridges, schools, water and sewer systems, stadium projects, museum districts, art collections, universities, and all sorts of projects that benefit our communities and society. If
Muni market follows the treasury market, same demand Jalso, Albert. Municipal bonds finally succumb to the rise in Treasury yields. Russell Investments. March 2, 2021//ab
https://russellinvestments.com/us/blog/municipal-bonds-treasury-yields While Treasuries have been selling off (pushing up their yields) on the reopening of the economy and inflation expectations, municipal bonds (munis) had remained resilient. The last three months saw very strong muni performance on low new issue supply and high demand due to expectations of rising tax rates from the Biden administration and the Democratic-controlled legislature. This changed during the past few weeks as munis sold off sharply—they had simply become too expensive versus Treasuries (Figure 1). This could potentially continue to play out in the weeks ahead as munis’ value relative to Treasuries normalizes. Once we get on the other side of this, it’s reasonable to expect muni outperformance as demand returns in response to the combination of cheaper valuations, improving fundamentals and the next potential government stimulus package (the version passed by the House on Feb. 28 included $650 billion in aid benefiting muni market issuers). Munis have had worse starts in previous years. For example, the first two months of 2018, when the Bloomberg Municipal Bond Index returned -1.38% (versus -0.96% for the first two months of 2021). For full year 2018 the Bloomberg Municipal Bond Index returned 1.28%, which is closer to a 1.80% taxable return when adjusted for an assumed 30% effective tax rate—so we have seen munis recover from worse selloffs. For potentially more resilient performance in the face of rising Treasury rates, we believe investors should consider high-yield municipal bonds. Looking at periods in the past six years when Treasury yields rose more than 50 basis points (bps), the Bloomberg High Municipal Bond Index outperformed the investment grade taxable and municipal bond markets in five out of the six cases (Figure 2). Municipal bonds could not resist the gravitational pull of Treasury yields forever, and the recent selloff was an inevitable technical event, and not related to any municipal credit issues.While volatility related to interest rate increases may persist over the near term, this could create opportunities, especially in high-yield municipals, which have tended to outperform during certain periods of rising rates.