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Have Munis Run Out of Gas?

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  • Description

    Vanguard head of fixed income Bob Auwaerter gives his outlook for the muni bond market.

  • Duration 4:10
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New niece municipal bonds are -- in twelve you know wide so says Bob Bauer he's head of the fixing -- that vanguard he oversees.

Almost 700 billion dollars and assets and he has taken some time and he is here with us now.

Bob do you think talk about that outperformance of municipal bonds and do you think that that -- can continue.

It certainly has been incredible if you look at five your returns take into account the value of the tax exemption.

And it to June 30.

Munis annualized returns over that period have been almost exactly 9% compared after the Dow Jones -- 2% are a lot of other.

Stock market indices are up for a -- matter bond market and indices.

Now I think we're pretty much so -- run out of gas we've had -- a new record lows pretty much across the of the yield curve but.

I mean -- figure out -- gonna get below zero but we're getting pretty close look.

Bob yeah and you called by the way when you are on last you're talking about how good a month July would be for municipal bonds simply because right there the -- investment activity.

Look ahead to the potential that -- the tax cuts particularly those for wealthier Americans.

Do not get extended in the year is that already factored -- -- meanings.

That's really are hard to say right there's -- a bit more discussion of about that lately.

I think you might get a little bit -- -- bump on Munis if that really comes to fruition but most of markets still.

Who's expecting that somehow they're -- going to be passed.

Looking at what is the but at any potential catalysts that you see it would -- treasury yields significantly higher.

There a little more than one point.

On one and a half percent on the ten year today.

Is there -- thing that could happen here or around the world that can't -- -- higher -- losses at least.

It and -- -- assuming you're not holding to maturity.

Right.

I would say there's two things that there is some sort of are very.

Systematic.

Process to bail out Spain and potentially Italy you know we are all the talk about BC deal.

Do whatever it takes -- course they also said that within its mandate so.

You know my mind is with regard -- that you're gonna talk the talk eventually have to walk the walk.

-- -- second thing is if something happens on the fiscal policy front again I just don't see that happening prior to the to the election.

And for that matter really not into the first quarter of 2013.

Look at our own Federal Reserve can that can.

Will the federal reserving can the Federal Reserve do any thing -- your mind.

That will drive down on longer term borrowing costs even more than -- -- fallen.

Not a heck of a lot they have board a lot of treasuries is -- editor of quantitative easing program there's been -- points of discussion out there in the market place.

That with today -- Wednesday's sell orders first FOMC meeting today might announce -- more mortgage securities.

But we are right now when you have mortgage rates down just a little bit over three and a half percent of that is -- stimulus for a housing market I don't know what there is so.

Hi I just don't see how that's gonna have that much an impact if you look each time it down one of these QE programs.

The marginal impact has become less and -- Look at the entire world the bonds which you do all day long every day Bob what is the worst category right now the most dangerously overvalued potentially always ask you like -- you know.

Maybe will you would life.

Or you would absolutely stay away -- with a stay away from at all costs.

We lost Bob.

He we use about tell us what used to stay away from at all costs that's one of those right we are alike are I'm gonna -- Allen thought to help -- -- a hundred life.

-- talking in -- -- -- and we lost its I wonder what was.

-- I don't -- everything in a lot of -- categories and -- I was trying to they have a very dumb joke but you're not gonna happen.

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