As the credit market matures, and historically low interest rates and market volatility continue, advisors must carefully measure opportunities for income, with an understanding of risk. In an upcoming event, Invesco’s team of fixed income experts will weigh in on the state of the fixed income and municipal bond markets, and discuss how advisors should be thinking about yield in the the years to come. REGISTER.
While the municipal bond market has clearly been struggling as a result of Covid-19 restrictions, there are reasons to be hopeful about niche sectors of the market. Aid from the federal government is expected to bolster local economies, hospitals, and essential services. While this is encouraging, it is going to take some time for this relief to be seen in the market. Invesco advisors are specifically finding value in short-term and high-yield municipal bonds. In the long-term, investors can strengthen their portfolios by capitalizing on the price volatility in the high-yield sector. Using credit research and experienced advisors, investors can pick out the bonds that are trading below their underlying fundamentals. Within the short-term space, rates look promising compared to taxable bonds. This type of bond can also produce better yield than money market funds without increasing price volatility.
From a macro perspective, the municipal market can bounce back from sell-offs. Investors would be best served by watching the market from an issuer by issuer, sector by sector vantage point. Essential services and the federal government are likely to be the two key drivers of the market going forward. The municipal market’s improvement in liquidity and tones the last few weeks coupled with low rates, indicate that the market offers a prime opportunity for investors as recovery is already underway. The Invesco team expects another effect of the economic stimulus to be tax increases. There are opportunities for investors to maximize their portfolio’s tax efficiency through the municipal market before these tax increases are implemented. Throughout all the highs and lows of the market, Invesco remains consistent in its aim of constructing portfolios with higher tax-exempt yields and strong, long-term total returns.
To learn more on this topic, register for invesco’s event: Balancing Income and Volatility as the Credit Cycle Matures.