The municipal bond market has rebounded from the historic volatility in March 2020 following the onset of the Global COVID-19 pandemic. However, uncertainty remains high and the outlook unclear. Strong inflows into the asset class juxtaposed with new challenges for state and local municipalities present investors with a unique environment. Looming debt from halted construction, pension plan liabilities, and stalled economic activity may pressure local economies for the next 12-18 months in a way that has never been seen before. While the Fed’s policy actions have helped prevent a credit crisis, the future is unknown for what has traditionally been a safe haven asset class for investors seeking tax free income. Many investors are looking beyond yield to higher quality credit selection. Now may be the time to upgrade the quality of your municipal bond portfolio.
GW&K Investment Management is a dynamic investment management firm that offers asset allocation, active equity and fixed income investment solutions to help meet the needs of a diverse client base. GW&K’s founding principles of applying rigorous fundamental research, focusing on quality and maintaining a long-term view still guide its investment process today.
There is significant variance across issuers from state to state with many local economies managing substantial budget gaps through the pandemic. Now is an important time to know what you own. GW&K has been managing high quality municipal portfolios since 1974 and has experience in all types of markets.
Recognize the risk. Current municipal bond market forces are historically unique.
Reevaluate your municipal allocation. Now is the time to look beyond yield, to higher quality.
Reach out for a consultative municipal bond portfolio analysis. Know what you own and how it compares.
Bond refinancings or “refundings” are used by state and local governments most frequently to achieve debt service savings on outstanding bonds.
This represents the views and opinions of GW&K Investment Management. It does not constitute investment advice or an offer or solicitation to purchase or sell any security and is subject to change at any time due to changes in market or economic conditions. The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes. Past performance is no guarantee of future results.
There are risks associated with investments in debt securities, such as default risk and fluctuations in the perception of the debtor's ability to pay its creditors. Changing interest rates may adversely affect the value of an investment.
An increase in interest rates typically causes the value of bonds and other fixed income securities to fall.
Factors unique to the municipal bond market may negatively affect the value in municipal bonds. Investment income may be subject to certain state and local taxes, and depending on your tax status, the federal alternative minimum tax. Capital gains are not exempt fromfederal income tax.
Market prices of investments may fall rapidly or unpredictably due to a variety of economic or political factors, market conditions, disasters or public health issues, or in response to events that affect particular industries or companies.
GW&K assumes no responsibility for the accuracy of the data provided by outside sources.
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