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Nuveen Asset Management co-head of fixed income John Miller gives his outlook for the Fed and bond market.
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Well -- looking for value investments look no further than your own backyard the bond buyer Muni bond index is yielding more than 4% much better than the of the US treasuries that's for sure.
But are you taking on too much risk with municipal bonds giving state budget and city budget crises joining me now to weigh in.
John Miller chief investment officer at new -- asset management John thanks so much.
Your comments on any market but since we're in the middle of -- fed meeting I have to get your take on if we're getting a message yet from the bond market as to what we may or may not hear from the Fed tomorrow.
I feel -- most bond market participants are probably expecting some form of additional easing policy.
At a minimum perhaps a continuation of what they call Operation Twist where the Federal Reserve.
Which was scheduled to end their purchases of longer term bonds.
May continue buying longer term bonds for the foreseeable future with the goal of keeping longer term interest rates depressed correct do you see at some point because so far have -- a whole lot to -- the economy.
Well the Fed is sort of only game in town for one looking forward and terms of domestic stimulus I think they they share some concerns about.
Softening in the employment and manufacturing markets here domestically.
Of course in addition to what's going on in Europe so there are poised to try to help.
Particularly when we have time potentially tighter fiscal policy coming on down the road at year end.
-- let's talk about Munis because giving -- the market climate when you look at that fixed income portion of the asset allocation high for an average investor this is getting a lot of attention right now so tell me -- you think that mean these are good bet for fixed income now combination of things first of all on the fundamental side of the equation.
State budgets have improved to they tend to be the big driver of credit trends across across the broader marketplace they have experienced two solid years in a row of revenue increases.
While generally speaking keeping costs under control the raising taxes and cutting spending but that's it like -- -- across support is you have some stress spot specifically California Illinois -- so.
We've had other conversations -- Muni experts warn you got your homework.
Sure as states cut their budgets that does put pressure on individual local municipalities.
And that's where becomes very much of a of a case by case analysis although broad brush strokes.
Trends have been improving.
There individual examples of credit risk in Stockton California and Jefferson County Alabama exception hear -- case of the default rate here's via closed out is it.
Peaked a couple of years -- so we're in a downtrend.
Correct the false and actually -- by 20102011.
Are coming down it looks like on a year to date basis 2012 they're coming down further.
Causing the higher yielding and lower rated Munis to outperform recently John -- interesting -- thanks for your perspective.
