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Muni Market a Safe Bet?

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  • Description

    BlackRock Managing Director Peter Hayes weighs in on the current state of investing in the muni-bond market.

  • Duration 3:48
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All -- volatility had a market that was down on this board appoints -- two days and then boom comes back.

So with all the volatility how about a tax free investment.

They will not keep you up at night I'm talking about municipal bonds Peter -- is managing director and portfolio manager at BlackRock.

An overseas black rocks national municipal fund Peter great need to be here thank you about a year ago Meredith Whitney said in the world is gonna come to an end all hell is gonna break loose and municipals and dollar 00 well.

It's one of the best performing fixed income classes next to long term government bonds in the last year it.

That's actually right is amazing to turn around where we stand a year ago -- and the real sell -- started last November.

And by this time last year we were in the throes of a pretty dramatic -- -- bad performance.

We've come all the way back so I think for those investors that have taken the time to do their homework get to know the asset class a little bit some of the structural protections that exists in the market.

It's history of low volatility in and high quality good returns.

As well as not paying attention to the headlines has certainly been been reward.

In terms of defaults in the last year where have they been historically in terms of the number and of course we've had some blow up that we're notable name Jefferson County them.

Jefferson County accidents in thing about -- -- the default itself occurred really in 2008 it was a bankruptcy right that occurred.

This year in terms of actual default rates vs historical levels Craxi below that of 2000 on in 2010 which you wouldn't think.

Might be the case this economic environment that's where we stand.

And most of that S has been in the high yield spectacles sector like land deals that the high yield part of -- part of the market not the high quality part of the market which is where most people invest.

How risky is -- that's one area of them the market that people often gravitate table cause of the higher yields with.

The ultra low yield environment how risky -- those issues that's a great point I think you do see that when rates are low.

And the search for income that's when you see global slowdown and that's what got it got us and children housing and frankly the that's right of that and that's when credit spreads -- -- and ariston in Mosul markets was in 2007.

So here we are again low yield environment people reaching for yield to some degree.

The high yield market is speculative it's much like the taxable high yield market default rates are are higher.

This hasn't a lot of new issuance in -- markets of people that are buying it either buying in the form of funds.

-- having to buy secondary issues those issues which largely are being sold by professional investors million sold for a reason.

There there's a lot of risk involved in in the name they have more downside so it's an area to watch so did.

Did default risk is contained but what about the interest rate risk here in the municipal market.

-- -- very risk exists in any fixed income and investment here we already -- a low in the cycle of in terms of rate so you have to think about an investment now.

In terms of buying for income if you one income what are your alternatives.

Munis offered good it good alternative to that he not buying the total return as you mentioned at the outset we had a very good year in total total return.

The ability for rates to go lower here and certainly look at what's happening today.

Do seem to be pretty -- seem to think about income if rates rise certainly you'll you'll lose some value but Munis have a history of rising less.

Than treasuries and other fixed income assets when interest rates rise in logo volatility history.

Do you think the bush tax cuts in extended next there expired and the next year.

I think I think admitted it might be bifurcated and they may get extended for certain levels of income and then not extended for -- -- levels of income that seems to be a thing -- talked about the most right now.

-- your income taxes going -- weakness in the polls don't want to alert I didn't on the U but by mean.

-- -- -- talked to thank you so much Peter Pace -- from municipal bonds you know we're tell you about that earlier this year this who are that the risk was way overblown and that can somebody was wrong.

Always ahead of the --

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