You're watching...
BlackRock Managing Director Peter Hayes on whether cutting tax breaks on muni bonds will impact the market.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
-- -- making -- taxpayers.
President Obama's 2013 budget plan cuts tax breaks on municipal bonds -- wealthy investors.
Will that have an impact on the municipal market and borrowing calls for municipalities.
But says Peter -- is managing director at BlackRock -- have -- municipal bond management there.
-- -- need to be here.
No reaction in the Muni bond market yet one on.
No we -- in the market I think it's keeping one eye out the -- has been introduced before it was introduced last I think September -- Obama's jobs bill.
And they realize a lot of hurdles that have to be cleared to get there that the government has been dysfunctional -- have a hard time getting anything passed in terms of the balance of power and you have an election coming up -- who's gonna control house the senate.
Who's gonna be in in the White House -- questions have to be answered so.
That the market is certainly keeping one eye open I think from a bigger perspective it's more focused on.
What the potential is for change in the overall tax code will be about the deductions are -- -- -- tax code will be a flat tax will be higher tax rates.
Clearly there's going to be releases of a big movement to change.
The tax code in the US so a year from now it -- -- they'll probably looking at a much different.
Version of tax policy US and that affects municipal bonds sold and it's a little bit early for the market to react.
It's it becomes of increasingly complicated situation do you have that do you believe me and this is may be an unanswerable question.
That it Italy at the very least kind of based on -- the president's proposal that that tax benefit of -- with municipal bonds will be reduced at some point do you think that that there will be a push there.
That I think there's been a push the of the administration's been pretty clear they don't like the idea of tax exemption or certain tax deductions.
For the wealthy or whatever -- income threshold you decide on.
So I think there's going to be a push to do that put in order to get consensus that's would difficulty lies in the biggest lobby against it's really quite frankly is the issuers.
Because -- the end of the day if you raise if you do affected and -- reduce the benefit of the tax exemption.
Borrowing costs go up from borrowing costs go up in only paralyzing wealthy taxpayers or those will be useful bonds.
You really analyzing although all the taxpayers within that issuers jurors jurisdictions like that's that's going to be allowed -- Right the knock on effects but if you compare how the municipal market is today vs a year ago is really -- stunning.
In terms of the demand from investors that one year performance of the entire municipal category do you think that that can continue.
It's remarkable that so little like a sports team its worst to first and it is incredible turnaround of course heroes that are here and we talked about some of distrust in the in the market a year ago.
And it wasn't really obvious then that was gonna turn around quickly it's -- a little bit of time.
Demand it took several -- actually come back physically from the retail investor but.
I think people took time to understand the structural protections inherent in the market the fact that fundamental credit story.
Was improving revenues -- better spending was being controlled.
All that's helping the man's back -- all -- -- -- really created a great value which investors recognized and that's why but ultimately.
Price performance was so strong that -- -- industry.
-- -- What what is the best looking part of the Muni market right now in terms of the value might still be left there at improving maybe that's something that's being overlooked.
They -- getting harder and harder to find obviously with the performance from last year is still removed -- -- of part of the market.
That relied most heavily on bond insurance which is now largely gone from the market so we would define that as the a rated credit part of the market.
Certain revenue sectors to high triple B category.
Spreads by historical standards still very very wide.
Parts and ties for individual investors to understand and they get console that level of credit and -- it doesn't -- don't I.
I don't manage product but that's clearly were -- -- most value in and the most spread I think in the in the market.
But it's about income not total return we've come a long way.
For rates to go lower going to be tough.
Yeah and have it for now it's tax what do you think probably is up illustrator is great to talk to you Peter Pace of -- rock.
Once see more often it's a great story and it will be developing -- -- campaign issue for sure that is -- thanks for navigator meanwhile.
