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This week we arrived at Tax Freedom Day, the first day of the year in which the nation as a whole has theoretically earned enough income to fund its annual tax burden. I can only speculate that the slowdown of inflows into munis is possibly related to investors allocating their financial resources to tax obligations. I do not presume that they are using any muni facility for funding purposes but the drop in activity is not unexpected at this time of the year.
Authored by James Colby
An equity market rebound, such as we witnessed yesterday (+181 points as measured by the DJIA1), usually spells doom for the fixed-income markets. Additionally, the revelation that Bill Gross has reduced his holdings in U.S. Treasuries by 4-5% would further the notion that the day would go badly for bonds. And with the Treasury auction of $13billion of 30 year-bonds...
Governmental issuers of municipal bonds will continue under scrutiny as long as unemployment remains above 8% and the soft housing market continues. This focus is warranted due to concerns over muni bond price declines for issuers struggling with economic recovery.
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Please note that MUNI NATIONs that are written by Jim Colby represent his opinions and these opinions may change at any time and from time to time. MUNI NATION is not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Non-Van Eck Global proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Global. © 2014 Van Eck Securities Corporation. MUNI NATION is a trademark of Van Eck Associates Corporation.
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Any discussion of specific securities mentioned in the commentary is neither an offer to sell nor a solicitation to buy these securities.
Municipal bonds are subject to risks related to litigation, legislation, political change, conditions in underlying sectors or in local business communities and economies, bankruptcy or other changes in the issuer’s financial condition, and/or the discontinuance of taxes supporting the project or assets or the inability to collect revenues for the project or from the assets. Bonds and bond funds will decrease in value as interest rates rise. Additional risks include credit, interest rate, call, reinvestment, tax, market and lease obligation risk. High-yield municipal bonds are subject to greater risk of loss of income and principal than higher-rated securities, and are likely to be more sensitive to adverse economic changes or individual municipal developments than those of higher-rated securities. Municipal bonds may be less liquid than taxable bonds.
The income generated from some types of municipal bonds may be subject to state and local taxes as well as to federal taxes on capital gains and may also be subject to alternative minimum tax.
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