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Municipal Bonds: 4Q’15 Outlook

What is your fourth quarter outlook for munis?

JAMES COLBY: My outlook is very healthy for the municipal marketplace. Why do I say that? Many of the factors that made munis attractive at the end of 2014 are still in place right now. They include certain aspects of the municipal market at large. I think the lower investment-grade and high-yield investments are still very attractively priced relative to the highest credit quality offerings in the municipal marketplace.

Also, one needs to compare munis to other asset classes. At Van Eck we've been looking at the relative value of municipals on a taxable-equivalent basis compared to other asset classes, and to us munis continue to stack up in providing superior income return to the investor. That has been the case for quite some time. I think the attractiveness of munis has been overshadowed by concerns about the economy and what the Federal Reserve is going to do.

Going into the fourth quarter, I believe it's very likely that we'll overcome some of these concerns and focus on positioning portfolios, and investing cash for the remaining three months of the year to generate income and performance for investors who have been otherwise occupied with other concerns in the economy and around the world.

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Please note that Van Eck Securities Corporation offers investment products that invest in the asset class(es) included in this video. 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. Additional risks include credit, interest rate, call, reinvestment, tax, market and lease obligation risk. Municipal bonds may be less liquid than taxable bonds. There is no guarantee that the Funds’ income will be exempt from federal or state income taxes, and changes in those tax rates or in alternative minimum tax rates or in the tax treatment of municipal bonds may make them less attractive as investments and cause them to lose value. Gains, if any, are subject to gains tax.

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