Municipal Bonds: Monitoring the Market | Lord Abbett
Image alt tag

Error!

There was a problem contacting the server. Please try after sometime.

Sorry, we are unable to process your request.

Error!

We're sorry, but the Insights and Intelligence Tool is temporarily unavailable

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Error!

We're sorry, but the Literature Center checkout function is temporarily unavailable.

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Tracked Funds

You have 0 funds on your mutual fund watch list.

Begin by selecting funds to create a personalized watch list.

(as of 12/05/2015)

Pending Orders

You have 0 items in your cart.

Subscribe and order forms, fact sheets, presentations, and other documents that can help advisers grow their business.

Reset Your Password

Financial Professionals*

Your password must be a minimum of characters.

Confirmation Message

Your LordAbbett.com password was successully updated. This page will be refreshed after 3 seconds.

OK

 

Fixed-Income Insights

Lord Abbett Portfolio Manager Dan Solender gives a quick view of the factors driving the muni-bond market. 

Transcript

AM with a PM

Dan Solender, CFA

Partner & Director

Air Date: February 10, 2021

00:04:41.220 --> 00:04:46.170

Hello, this is Dan Solender, I’m director of tax-free fixed income and a Partner at Lord Abbett.

INTERSTITIAL: Municipal Bonds: The Current Environment

00:00:14.250 --> 00:00:20.010

We're off to a very good start this year and in the municipal bond market so far this year, everything is really working well. So far, some of the big things going on are that demand has been strong [while] supply is on the lower side. Credit quality is holding up well. Everything really started to turn even more positive back in November [2020] when the vaccine became known, [B-ROLL: Vaccine footage] and an expectation came up that it was going to be disseminated, which has been a big turn.

And then the bigger trigger, more recently, has been the Biden Administration wanting to put through a large fiscal stimulus package which is working its way through Congress. [B-ROLL: U.S. Capitol] We think all that put together gives signs that the economy has a light at the end of the tunnel, because when the vaccine gets disseminated more people can obviously return back to normal.

And the fiscal stimulus will target a lot of parts of the municipal bond market that can use the funding. It's not just the state and local governments--they get the biggest attention. But it's also things like [B-ROLL: Airports, hospitals, etc.] airports and hospitals and universities and school districts--all kinds of things can get funding from the fiscal stimulus to help them through this time.

And one thing we've seen over the last year is that expectations got really, really low back in March or April [2020]--expectations of where tax revenues would come in, expectations of how credit would perform. But now that we've gone through this time period we've seen that revenues only dropped a little bit, not that much, and states are holding up much better. A lot of the things like airports, toll roads have much better balance sheets than people expected. And with the help from the original CARES Act they made it through okay. [LOWER THIRD: CARES Act refers to the Coronavirus, Aid, Relief and Economic Security Act, a $2 trillion economic relief packaged enacted in 2020 in response to the pandemic.] to individuals and businesses and provides other financial assistance as compensation for the havoc the virus has caused. So a lot of things are holding up just like that and other sectors as well.

So, as we get to this part--as we get into February now we're seeing [that] this year the best performing part of the market has been lower quality, which really lagged last year. If you look at actually the flows into municipal bond funds in 2020 they were actually the fourth highest in history, at about $43 billion, but high yield municipal bond funds actually were in net outflows. [LOWER THIRD: All mutual-fund flow information is based on data from Refinitiv Lipper.] are from Now that's turning positive; flows are coming in across the board and all different types of maturity—long, intermediate, short--high yield, investment grade, separately managed account funds everywhere, so the demand has been good, as people are getting comfortable with this economy and looking at the relative value versus other markets and thinking it looks good.

00:02:28.260 --> 00:02:36.960

So that's one thing and then you know the [U.S.] fiscal stimulus is the other, and then the supply, we are seeing a time period when supply is not that high. And even last year it looked like supply was high, but in reality, a lot of it was taxable municipal bonds [issued] in reaction to the previous [2017] Tax Act, a couple years ago.

So looking forward, demand is good, supply is good, credit has held in and is doing better. We see a light at the end of the tunnel. We [the municipal bond market] performed very well this year but there's still room to come back even further versus where we were a year ago before the pandemics, so the outlook just looks good and municipal bonds were off to a great start, we appreciate all the interest everywhere shown in our product, so thank you for your time, thank you for your interest in our firm and we look forward to seeing what comes out of the fiscal stimulus and looking at how the rest of the year unfolds, which seems pretty good right now.

________________________________________

Unless otherwise noted, all discussions are based on U.S. markets and U.S. monetary and fiscal policies.

Asset allocation or diversification does not guarantee a profit or protect against loss in declining markets.

No investing strategy can overcome all market volatility or guarantee future results.

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

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. The municipal bond market may be impacted by unfavorable legislative or political developments and adverse changes in the financial conditions of state and municipal issuers or the federal government in case it provides financial support to the municipality.

Certain sectors of the municipal bond market have special risks that can affect them more significantly than the market as a whole. Because many municipal instruments are issued to finance similar projects, conditions in these industries can significantly affect an investment. A portion of the income derived from a municipal bond may be subject to the alternative minimum tax. Any capital gains realized may be subject to taxation. Federal, state, and local taxes may apply. There is a risk that a bond issued as tax-exempt may be reclassified by the IRS as taxable, creating taxable rather than tax-exempt income. High-yield securities, sometimes called junk bonds, carry increased risks of price volatility, illiquidity, and the possibility of default in the timely payment of interest and principal. Bonds may also be subject to other types of risk, such as call, credit, liquidity, interest-rate, and general market risks. Longer-term debt securities are usually more sensitive to interest-rate changes; the longer the maturity of a security, the greater the effect a change in interest rates is likely to have on its price. Lower-rated bonds may be subject to greater risk than higher-rated bonds. No investing strategy can overcome all market volatility or guarantee future results.

The credit quality of the securities in a portfolio are assigned by a nationally recognized statistical rating organization (NRSRO), such as Standard & Poor’s, Moody’s, or Fitch, as an indication of an issuer’s creditworthiness. Ratings range from ‘AAA’ (highest) to ‘D’ (lowest). Bonds rated ‘BBB’ or above are considered investment grade. Credit ratings ‘BB’ and below are lower-rated securities (junk bonds). High-yielding, non-investment-grade bonds (junk bonds) involve higher risks than investment-grade bonds. Adverse conditions may affect the issuer’s ability to pay interest and principal on these securities.

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.

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 © 2021 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.

FOR MORE INFORMATION ON ANY LORD ABBETT FUNDS, CONTACT YOUR INVESTMENT PROFESSIONAL OR LORD ABBETT DISTRIBUTOR LLC AT 888-522-2388, OR VISIT US AT LORDABBETT.COM FOR A PROSPECTUS WHICH CONTAINS IMPORTANT INFORMATION ABOUT A FUND'S INVESTMENT GOALS, SALES CHARGES, EXPENSES AND RISKS THAT AN INVESTOR SHOULD CONSIDER AND READ CAREFULLY BEFORE INVESTING.

ABOUT THE SPEAKER

image

Please confirm your literature shipping address

Please review the address information below and make any necessary changes.

All literature orders will be shipped to the address that you enter below. This information can be edited at any time.

Current Literature Shipping Address

* Required field