Due to higher and consistent returns, investors are buying municipal bonds at a record rate.
Historically, investment-grade and high-yield municipal bonds (MUB) have a very low correlation with most other asset classes.
Generally, municipal bonds (SUB) are immune to market volatility, thus providing considerable support to a portfolio.
Over the years, average returns from municipal bonds (CMF) are in line with the broader index. They outperformed in some years and underperformed in others.
Municipal bonds (MUB) have provided an excellent return in the past year. The returns are even better if we account for their tax benefits.
Adding carry to your portfolio in a low-return scenario could cushion your portfolio.
The spread between high-yield bonds and ten-year Treasuries was high over the past three years, enough to lure investors to corporate bonds and away from equities.
U.S. municipal debt looks attractive against other bond sectors, and we see potential for inflows after munis’ recent strong performance.
The start of 2016 has been marked by an increase in the quantum of fallen angel bonds in the high-yield bond market (HYG) (JNK).
High-yield bond funds regained some lost favor this year. Fallen angel bonds could be an extremely attractive value proposition for investors.
Widening spreads indicate a slowing economy. Since companies are more likely to default in a slowing economy, credit risk related to their bonds rises.
Another cycle that is closely related to the business cycle is the credit cycle, the expansion and contraction of access to credit in an economy.
An investment in municipal bonds means investing at home. Munis are issued by U.S. states and their political subdivisions only.
Gross says it’s important for investors to “take care of their liquidity.” They should have their exit options open in their fixed-income portfolio.
According to Bill Gross, “Zero destroys existing business models such as life insurance company balance sheets and pension funds.”
BUTCHER: Thank you. Do you see any specific opportunities today? COLBY: I think there are two fairly distinct opportunities for investors to consider. One is based on interest rates and…
TOM BUTCHER: What are the advantages of investing in municipal bonds in the current environment? JIM COLBY: There’s a great deal of uncertainty and volatility in the overall marketplace right…
Municipal bonds (or munis) were the best performers in 2015 with returns of 3.2%. Meanwhile, investment-grade corporate bonds (LQD), long-dated Treasuries (TLT), and high-yield bonds (HYG) all gave negative returns in 2015.
The ten-year Treasury (IEF) yield has plunged in recent weeks. It dipped from 2.3% at the start of this year to ~1.6% currently, in a risk-off trade.
An alternative investment is an investment in asset classes other than stocks, bonds, and cash that seeks to provide a hedge against various market risks.