Muni Credit Plays Defense When Rates Rise

Muni Credit Plays Defense When Rates Rise

As interest rates nudge higher, many municipal bond investors worry about the impact on their portfolios. Muni credit, which holds its value better when rates rise, could be the solution.

Lower-rated municipal bonds act as a buffer during periods of rising rates. That’s partly because official rate hikes and the rising yields that accompany them are a response to a strengthening economy. Improving economic conditions can help companies with lower credit quality bolster their revenues and creditworthiness. The securities’ higher income also helps preserve capital better.

Municipal credit has shown its defensive stripes consistently. BBB-rated munis outperformed AAA munis and US Treasuries during the last five Fed-tightening cycles and during the current one as well.

PIMCO’s Johnson, GMO’s LeGraw and DWS’ Rudy at Morningstar on how to hedge inflation

InflationInflation has been a big focus of Wall Street in recent months, and it won't go away any time soon. But where do we stand with inflation? Has it peaked, or will it continue higher? Q2 2021 hedge fund letters, conferences and more Nic Johnson of PIMCO, Catherine LeGraw of GMO, and Evan Rudy of Read More

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.

Article by Alliance Bernstein

Updated on

No posts to display