Weekly MainStay Muni Monitor
Wednesday, March 5, 2014
Muni Thoughts for the Week Ending February 28, 2014:
- The continued lack of issuance of high-yield municipal securities is causing credit spreads to continue to narrow as municipal high-yield fund flows remain positive. Year-to-date, the Barclays Municipal Bond Index is up 3.14%, and the Barclays Municipal High Yield Bond Index is up 5.42%.
- Representative David Camp’s tax code overhaul plan, announced last week, does include a tax on municipal debt, but we believe the proposal is far from being incorporated.
- Dealer capital continues to decline even with the exemption of municipal bonds from the Volcker Rule.
Credit Ratings: AAA credit ratings apply to the underlying debt securities and are rated by an independent rating agency, such as Standard & Poor's (S&P), Moody's, and/or Fitch. S&P rates borrowers on a scale from AAA to D. AAA through BBB represent investment grade, while BB through D represent non-investment grade. Moody's rates borrowers on a scale from Aaa through C. Aaa through Baa3 represent investment grade, while Ba1 through C represent non-investment grade. Fitch rates borrowers on a scale from AAA through D. AAA through BBB represent investment grade, while BB through D represent non-investment grade.
The Barclays Municipal Bond Index is a market value weighted index of investment-grade municipal bonds with maturities of one year or more.
The Barclays Municipal High Yield Bond Index is an unmanaged index of municipal bonds rated below BBB/Baa.
The 30-day visible supply is the total volume in dollars of municipal bonds with maturities of 13 months or more that should reach the market within 30 days.
"Haircut" is the difference between prices at which a market maker can buy and sell a security.
Past performance is no guarantee of future results. It is not possible to invest in an index.
A portion of the Fund's income may be subject to state and local taxes or the alternative minimum tax. Treasurys are secured by their full faith and credit. Income from Treasury securities is exempt from state and local taxes.
All mutual funds are subject to market risk and will fluctuate in value.
This material contains the opinions of the MacKay Municipal Managers™ Team of MacKay Shields LLC, but not necessarily those of MacKay Shields LLC. The opinions expressed herein are subject to change without notice. This material is distributed for informational purposes only, and is not intended to constitute the giving of advice or the making of a recommendation. The investments or strategies presented are not appropriate for every investor, and do not take into account the investment objectives or financial needs of particular investors. An investor should review with its financial advisors the terms and conditions and risks involved with specific products or services, and consider this information in the context of its personal risk tolerance and investment goals. Forecasts, estimates, and certain information contained herein are based upon proprietary research, and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Any forward looking statements speak only as of the date they are made, and MacKay Shields LLC assumes no duty and does not undertake to update forward looking statements. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of MacKay Shields LLC.
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MacKay Shields LLC is an affiliate of New York Life Investment Management LLC. MainStay Investments® is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. Securities distributed by NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, New Jersey 07054.