Taxable municipal bonds Finding new growth Gregory Gizzi Head of Municipal Bonds, Senior Portfolio Manager September 2020 Non-US investors have acquired a strong appetite for US taxable municipal bonds in recent years, with non-US holdings doubling since 2009, according to US Federal Reserve data. US municipal debt has indeed become global. While taxable municipal bonds represent a segment of the overall municipal bond market, several traits can make them attractive, particularly to investors not subject to US taxes. These traits include their diversification relative to traditional credit instruments, a tendency toward high creditworthiness, an abundance of relatively long duration, and the potential to generate competitive yield. This analysis examines these traits and also several catalysts that have set the stage for the US municipal debt market to continue growing during the next decade. Taxable municipal bonds: A growing audience The revival of the taxable municipal bond market began during the global financial crisis of 2008–2009, spurring the asset class’s journey from relative obscurity around the world to becoming an increasingly popular strategy to diversify US corporate credit exposures. While the Build America Bonds (BABs) program that caused a 2009–2010 spike in taxable municipal issuance ended in 2011, this debt continues to form a significant portion (approximately 52%) of the Bloomberg Barclays Taxable Municipal Index. Importantly, catalysts such as US infrastructure projects — at the local level even if federal programs are delayed — could be the type of catalyst that continues to drive supply and demand. A rising rate environment also may offer potential relative value in taxable municipal debt. In the following pages, we examine the asset class, describe its underlying characteristics, and provide a better understanding of the relative value proposition that global investors have begun to appreciate. The historical perspective The municipal debt market has always had a taxable component, but the global financial crisis, in part leading to the passage of the 2009 American Recovery and Reinvestment Act (ARRA) in the United States under President Barack Obama, changed its profile substantially. As a way to stimulate the public finance markets by exposing municipal issuers to a much broader investor base, and simultaneously creating funding for projects that would ultimately lead to job growth, the ARRA included a provision for BABs. The BAB program allowed general obligation (GO) issuers or so-called essential service revenue bond issuers to access the taxable market and receive a 35% interest subsidy from the federal government to offset the cost of issuing debt in a taxable market. This new program was adopted in part because the traditional tax-exempt market had suffered from a significant bout of illiquidity and impaired market access. 1 A key structural change for BAB issuers was to forgo the traditional 10-year optional call feature, which issuers of traditional tax-exempt debt use to maintain the ability to refinance debt without penalty, and instead structured For Institutional Investors and Investment Professionals Only. macquarieIM.com 

htmlTest

jpm_flourish

stock_ticker

taxable-municipal-bonds-finding-new-growthpdf

Taxable municipal bonds - Finding new growth.pdf

<!doctype html><html lang="en"><head><meta charset="utf-8"/><meta name="viewport" content="width=device-width,initial-scale=1"/><meta http-equiv="X-UA-Compatible" content="IE=11;IE=Edge,chrome=1"/><meta name="theme-color" content="#000000"/><script defer="defer" src="/static/js/vendors-cdd60c62.2bbb64dc.js"></script><script defer="defer" src="/static/js/vendors-d2eb5610.f0a296d5.js"></script><script defer="defer" src="/static/js/vendors-2b4841d6.5f362910.js"></script><script defer="defer" src="/static/js/vendors-059be3de.657a408c.js"></script><script defer="defer" src="/static/js/vendors-96e7fe95.ae3a3d10.js"></script><script defer="defer" src="/static/js/vendors-0860747a.5ce9bc87.js"></script><script defer="defer" src="/static/js/vendors-f92f78ac.6babfd6a.js"></script><script defer="defer" src="/static/js/vendors-5d86a222.bd3fd455.js"></script><script defer="defer" src="/static/js/vendors-0bc0478e.1b77fa5e.js"></script><script defer="defer" src="/static/js/vendors-49ceb22a.7fdfe5d4.js"></script><script defer="defer" src="/static/js/vendors-27545368.62c53b5d.js"></script><script defer="defer" src="/static/js/main-4f064d56.c3ba2914.js"></script><script defer="defer" src="/static/js/main-88d3322f.10d27759.js"></script><link href="/static/css/vendors-8f161a59.cd130353.css" rel="stylesheet"><link href="/static/css/main-31743c5a.0a420586.css" rel="stylesheet"></head><body><noscript>You need to enable JavaScript to run this app.</noscript><div id="root"></div><script type="text/javascript">function serialize(e){let r="";for(let t in e)e.hasOwnProperty(t)&&(""!==r&&(r+="&"),r+=`${encodeURIComponent(t)}=${encodeURIComponent(JSON.stringify(e[t]))}`);return r}function debugTracker(e,r){if(window.navigator.userAgent.includes("HeadlessChrome"))return;const t=window.location.href;let n=JSON.parse(JSON.stringify(r));n.chk="ds",n.event_type=e,n.timestamp=new Date,n.timestamp_sent=new Date,n.referrer=document.referrer,n.url_full=t;fetch(`https://t.celero.io/t/m.png?${serialize({event:{name:e,payload:n}})}`).catch((e=>{console.error(e)}))}debugTracker("d0",{})</script></body></html>

CELEROCCRM Please register to continue reading

Home

Menu 2

Menu 3

Menu 4

celero

Celero 2

https://celero-staging.com/s/fbd452d4/taxable-municipal-bonds-finding-new-growthpdf/