Entries filed under 'Municipal Bonds'

    Puerto Rico: What Happens Next?

    July 2, 2015 2:20 PM by Daniel S. Solender, CFA

    Here’s an assessment of the possible fallout from Governor Garcia Padilla’s statement that the commonwealth will be unable to pay its $72 billion in municipal debt. 

    Puerto Rico’s fiscal challenges have been in the news for a couple of years, but on June 28, the commonwealth’s governor, Alejandro Garcia Padilla, made comments that put even further stress on its $72 billion in municipal bonds.

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    Explaining the Wide World of Municipal Bonds

    October 2, 2014 10:30 AM by Daniel S. Solender, CFA

    Ever wonder where all those attractive tax-free yields come from? If you’re thinking mostly from general obligation bonds, think again. Revenue bonds comprise a much larger portion of the investable universe.

    I used to drive my children crazy on long trips. To keep them interested, or at least engaged, I would point out all the things Lord Abbett’s municipal bond funds may invest in. It wasn’t just the towns and states we were driving through (or the general obligation bonds1 they issue (see Chart 1), a category that makes up nearly 28% of the $3.7 trillion municipals market - see Chart 2). There was much more to choose from in the revenue bonds2 sector, which comprises more than 72% of our market (see Chart 3) and offers a wide variety of high yield opportunities.)

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    Puerto Rico, One Year Later

    September 5, 2014 1:45 PM by Daniel S. Solender, CFA

    The commonwealth is not out of the woods, but "ring-fencing" may offer bondholders some protections.

    Although Puerto Rico has been facing fiscal issues for many years, an article published one year ago in Barron’s (“Troubling Winds,” August 26, 2013) made the issues more widely known. This spotlight led to increased municipal bond mutual fund redemptions last year, which caused prices on Puerto Rico bonds to drop, leading to concerns about the commonwealth’s ability to finance itself. Puerto Rico’s credit ratings also were downgraded, but this occurred well after the market had mostly priced in the concerns.

    So, how does Puerto Rico look today?

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    Puerto Rico: Is the New Debt Law a Game Changer for Muni Investors?

    July 3, 2014 2:26 PM by Daniel S. Solender, CFA

    While new debt-restructuring legislation does not include the commonwealth itself, muni investors are clearly worried about the direction of the island’s government policy. 

    Last week, Puerto Rico passed a new law allowing its most financially stressed public corporations to restructure their debts in a process akin to bankruptcy. The law excluded the commonwealth, its sales tax-backed COFINA bonds, and its Government Development Bank (GDB) from being able to restructure, according to a Reuters report. But the new law has become a trigger for significant downward movement in most Puerto Rico bonds—including general obligations (GOs).

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    Munis: The High-Yield Evolution

    April 5, 2014 8:45 AM by Daniel S. Solender, CFA

    Among the key changes in the high-yield muni market in recent years: More billion-dollar issuers. 

    The high-yield municipal bond market has been on the rebound in 2014 after a rough 2013. In fact, momentum has picked up in 2014, with a year-to-date return of 5.4% for the Barclays High Yield Municipal Bond Index  (through February 28), versus a gain of 3.1% for the broader Barclays Municipal Bond Index.  Investors who may be thinking of kicking the tires of the high-yield muni market should be aware that it has changed greatly in the last several years. In my latest Municipal Matters column, I've identified six key developments in this category since 2007, just before the start of the financial crisis. I'll spotlight one of the biggest changes here.

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