Seeking Shelter in Munis

Published on
January 14th, 2019
Topic
Credit Market, Bonds, US Economy
Duration
32 minutes
Asset class
Bonds/Rates/Credit

Seeking Shelter in Munis

The Expert View ·
Featuring Frazer Rice

Published on: January 14th, 2019 • Duration: 32 minutes • Asset Class: Bonds/Rates/Credit • Topic: Credit Market, Bonds, US Economy

In a time of elevated volatility in equity markets, where can investors turn for principal protection and incremental income? Frazer Rice of Wealth Actually argues in favor of municipal bonds, discussing areas of potential opportunity and risk, as well as highlighting the unique attributes of the asset class. Filmed on January 2, 2019 in New York.

Comments

  • KL
    Kathlyn L.
    20 January 2019 @ 22:50
    Was the cinematographer for this interview the same guy who shot the Joel Schumacher film Batman & Robin?
  • FR
    Frazer R.
    18 January 2019 @ 00:41
    Here is a recent interesting recent story of Higher Education credit risks referenced at 27:00 https://www.bostonglobe.com/metro/2019/01/15/hampshire-college-facing-financial-pressure-considers-merger/hKHgkWoZ1Ca5bs952kknCL/story.html
  • GH
    Gregory H.
    14 January 2019 @ 21:12
    Point about the call features was quick, but very important: (1) Extreme majority of muni par weighed issuance is at a 5% Coupon, with YTC (or YTW for investors) generally ranging anywhere from 2.5% to 4.0% post-call date, which leads to original issuance prices premiums up in the 120s, depending on where you are on the curve, the call date tenor, and the overall rate environment (up in the 130s during 2016). (2) Standard Par-Call Tenor for bonds at issuance is 10 years from sale date, but there have been more short calls (5, 7, or 8 year) since tax reform, because of the elimination of advance refundings (used to be able to refund before stated call date). (3) Because of this premium original pricing structure, unless an issuer's credit takes a turn for the worst, 99% of 5% coupon structures are called. "Rolling down the curve" also helps bond savings for the refunding process. Obviously, this would be moot if you think there is a new high rate environment we are entering. One last separate point: There are hundreds of billions of taxable municipals that are available for those with tax-advantaged accounts, generally with larger par amounts and way fewer CUSIPs.
    • FR
      Frazer R.
      14 January 2019 @ 22:12
      All terrific points. Thanks for the extra detail.
  • MP
    Mark P.
    14 January 2019 @ 20:42
    Any bond pros out there have thoughts on TFI ETF or Vanguard’s Ca Muni mutual funds?
  • WB
    Wes B.
    14 January 2019 @ 15:32
    My Muni portfolio just got back to the level it was prior to Trump election even after 2 years of coupons... Holding any duration has been a tough up until last 60 days.

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