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Total new municipal bond issuance in the U.S. was $102 billion year-to-date (YTD) ending May 23, 2014. Tax-exempt municipal bond issuance was $93 billion during the same period. The difference between the two was taxable municipal bond issuance. Consider overlaying this data mentally with the recent performance of the municipal indices.
Authored by James Colby
Rhode Island. The Ocean State. Little Rhody. It is officially the smallest U.S. state in area but the second most densely populated with a little over one million residents as of a 2012 census estimate. It was also the first of the original 13 colonies to declare independence from British rule. Why this little civics refresher? Rhode Island is at the heart of a serious discussion centered on the "moral obligation" to pay a debt, according to a recent Reuters article.
The mood and landscape of the municipal bond market at the end of April could not have been more different from the general municipal bond market sentiment of 2013. Those who have paid attention to some of the fundamentals have reason to smile, in my opinion. April marked the fourth consecutive month of positive returns for the municipal bond asset class, as measured by the Barclays Municipal Bond Index, which was up 4.56% YTD as of April 30, 2014. I believe tensions in some former "Eastern Bloc" nations, a sputtering economic recovery, and a municipal market bereft of a more normalized pattern of heavier spring issuance have all conspired to create a strong bid for fixed income.
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Please note that the information herein represents the opinion of Jim Colby and these opinions may change at any time and from time to time. 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.
All indices listed are unmanaged indices and do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made.
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.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.MKT.VCTR | 888.658.8287. Please read the prospectus and summary prospectus carefully before investing.
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