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Fixed-Income Insights

Rising rates, new regulations, and low supply are among the top trends in the muni bond market.

Transcript

Lord Abbett's Investment Perspectives

Muni-Bond Watch: Changing Rules, Rising Rates

Daniel Solender, CFA
Partner & Director of Tax-Free Income

Dan Solender: Hello. My name is Dan Solender. I'm director of the tax-free fixed income group.

What's top of mind for muni investors?

Solender: I think we focused a lot on global issues today, so for my final thoughts I'll focus more on things specific to the municipal bond market. And one of the first ones to think about is that, you know, everyone's focused on interest rates rising, and the thing is, we've been up almost half a percent in most interest rates this year. And if people look at how the returns have been so far this year, it's interesting they're up a little bit or maybe down a little bit less than 1%. And the impact from rates rising has not been that bad on portfolios, so portfolios can handle it better than most people might expect.

Another interesting thing I'm thinking about on the municipal bond side is the new regulations this year and the M.S.R.B. rule requiring dealers to put their markups on bonds and disclose 'em on their confirms to clients. It’s having a big impact, bringing a lot of demand into our market. That's something to watch going forward as all these different approaches to it are being used in the market.

And then finally, just looking at our market, the supply's been low. We have a lot of interesting components from the tax bill and just watching going forward how they impact our market, which so far has been a benefit for us. So overall, things are good.

Return information for the municipal bond market is based on the performance of the Bloomberg Barclays Municipal Bond index, a rules-based, market-value-weighted index engineered for the long-term tax-exempt bond market. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.

No investing strategy can overcome all market volatility or guarantee future results. Statements concerning financial market trends are based on current market conditions, which will fluctuate. All investments carry a certain degree of risk, including the possible loss of principal, and there are specific risks that apply to each investment strategy.

IMPORTANT INFORMATION

The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. Lord Abbett has no obligation to update any or all of such information. All amounts, market value information, and estimates included herein have been obtained from outside sources where indicated or represent the good faith judgment of Lord Abbett. Where such information has been obtained from outside sources, Lord Abbett cannot guarantee the accuracy or completeness of such information.

References to specific securities and issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. The securities referenced may or may not be held in portfolios managed by Lord Abbett and, if such securities are held, no representation is being made that such securities will continue to be held.

Risks to Consider: The value of investments in fixed-income securities will change as interest rates fluctuate and in response to market movements. Generally, when interest rates rise, the prices of debt securities fall, and when interest rates fall, prices generally rise. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Investments in high yield, lower-rated debt securities, sometimes called junk bonds, may involve greater risks than higher-rated debt securities. Lower-rated securities are subject to greater credit risk, default risk, and liquidity risk. Credit risk is the risk that debt issuers will become unable to make timely interest payments, and at worst will fail to repay the principal amount. The municipal market can be affected by adverse tax, legislative, or political changes, and by the financial condition of the issuers of municipal securities. Income from municipal bonds may be subject to the alternative minimum tax. Federal, state and local taxes may apply. Investments in Puerto Rico and other U.S. territories, commonwealths, and possessions may be affected by local, state, and regional factors. These may include, for example, economic or political developments, erosion of the tax base, and the possibility of credit problems.

Market forecasts and projections are based on current market conditions and are subject to change without notice. Projections should not be considered a guarantee.

This broadcast may contain assumptions that are “forward-looking statements,” which are based on certain assumptions of future events. Actual events are difficult to predict and may differ from those assumed. There can be no assurance that forward-looking statements will materialize or that actual returns or results will not be materially different from those described here.

This broadcast serves as reference material and is provided for general educational purposes only; does not constitute an offer to acquire, solicitation for an offer to acquire, an offer to sell or solicitation for an offer to buy, any securities, nor is intended to be relied upon as a forecast, research, or investment advice on any securities, and cannot be used for any of the foregoing.

The views and opinions expressed by the Lord Abbett speaker are those of the speaker as of the date of the broadcast, and do not necessarily represent the views of the firm as a whole. Any such views are subject to change at any time based upon market or other conditions and Lord Abbett disclaims any responsibility to update such views. Neither Lord Abbett nor the Lord Abbett speaker can be responsible for any direct or incidental loss incurred by applying any of the information offered.

The value of investments and any income from them is not guaranteed and may fall as well as rise, and an investor may not get back the amount originally invested. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon, and risk tolerance. Please consult your investment professional for additional information concerning your specific situation.

The information provided is not directed at any investor or category of investors and is provided solely as general information about Lord Abbett’s products and services and to otherwise provide general investment education. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment-related course of action as neither Lord Abbett nor its affiliates are undertaking to provide impartial investment advice, act as an impartial adviser, or give advice in a fiduciary capacity. If you are an individual retirement investor, contact your financial advisor or other fiduciary about whether any given investment idea, strategy, product or service may be appropriate for your circumstances.

This broadcast is the copyright© 2018 of Lord, Abbett & Co. LLC. All Rights Reserved. This recording may not be reproduced in whole or in part or any form without the permission of Lord Abbett. Lord Abbett mutual funds are distributed by Lord Abbett Distributor LLC.

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MIDYEAR OUTLOOK

Get insights from our investment leaders on key topics for the second half of 2018.

Our Experts Give Their Macro Views
• What Is the Yield Curve Telling Us? 
• Positioning Portfolios
• Muni Matters: Five Key Takeaways

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