LIPPER AWARDS-Lipper winners answer the muni bond riddle
(The author is a Reuters contributor. The opinions expressed are his own.)
By Lewis Braham
PITTSBURGH, March 21 (Reuters) - One could forgive municipal bond investors for being confused. While the average muni bond was down 2.6 percent in 2013, making it one of the worst-performing bond sectors this year, munis are already up 3.1 percent through March 19, making it one of the best.
Many of the conditions that existed last year continue today. Muni investors are still worried about the outcomes of the financial struggles of Detroit and Puerto Rico. And there is still persistent fear of rising interest rates decimating bond values. (Bond prices move inversely to rates.)
So what gives?
Reuters asked a number of 2014 U.S. Lipper Fund Awards' winners for answers.
While Detroit's bankruptcy played a role last year, manager Peter Hayes of BlackRock Strategic Municipal Opportunities Fund , a winner of the 2014 U.S. Lipper Fund Awards, says the spike in interest rates that occurred last May did most of the damage.
From May 1 through the end of July, the 10-year U.S. Treasury bond yield rose from 1.66 percent to almost 3 percent as investors panicked about the Federal Reserve bank scaling back its bond-buying program.
While investor concerns about rising rates persist, Hayes says bonds are now priced more appropriately. Continuación...