Displaying items by tag: bonds

(Washington, D.C.)

Yellen, former chairmen of the Federal Reserve, was confirmed by the Senate in her nomination for secretary of the treasury. The 84-15 vote reflects both Republicans willingness to work with the Biden administration on economic issues, and Democrats desire to brand their own economic reactions to the covid crisis. Yellen, previously at Brookings Institution, has a decorated history in public service working for Clinton administrations council of economic advisors, CEO of San Francisco regional federal reserve bank, and chair of the Federal reserve. Yellen faces many challenges in her role as treasurer both with the current state of the economy and the looming U.S. debt. Yellen plans to work closely with current Federal Reserve Chairman Jerome Powell to address the U.S. economy.

FINSUM: Yellen historically is known for reading the economy through the lens of the labor market, so expect her policy guidance to be especially informed through a variety of labor market indicators. Additionally expect Yellen’s policy to be more expansionary than a previous administration, but she is weary of the U.S. current debt and has denounced the large deficits supported by Modern Monetary Theory.

(Washington)

Munis bonds have done well recently, but the ultra-low rate environment seems to have confused many about their relevance. It is critical to remember that despite yields being so low, munis still very much have a place in the environment. In fact, one could argue the current environment is better for munis than a more conventional one. The reason why is that munis still have a major spread advantage versus taxable equivalents. For example, while munis only yield an average of 0.86% right now, that translates to a taxable yield of 1.53% for those in the top income bracket. However, as we all know, Treasury yields are still much nearer to 1%, meaning munis current enjoy a major advantage over taxable bonds.

FINSUM: Given Biden and the Democrats’ support of state and local municipalities, and munis’ currently yield advantage, there is no reason for the asset class not to have a great year.

Advisors don’t need to be told that rates are at ultra-low levels. Yet despite this, munis are still maintaining their attractiveness. See the full story here on our partner Magnifi's site.

(Washington)

One of the big risks to the muni sector that has gone underappreciated by the financial media and investing community is the threat of the soon-to-be revamped SEC making some big changes to the asset class. See the full story here on our parnter Magnifi's site.

(New York)

Munis had a wild and rough year in 2020. Everyone who invests in the sector is wondering what’s next. While the lack of direct state and municipal aid in the recent congressional package is a downer for muni investors, there is a lot to be happy about. Election certainty, good news on the vaccine front, and the inauguration of Biden are all raising the sector’s prospects. Biden is seen as more likely to help local state and municipalities with aid, which has raised prospects for the sector. Downgrades are a risk, but widespread defaults seem unlikely.

FINSUM: On the whole, things seem like they are set up for a pretty positive year. As to the possibility of downgrades, it is worth noting that downgrades usually trail economic performance, so they would take a while to come through.