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.

Morningstar Investment Conference: Using Annuities In A Portfolio For Added Stability

portfolioOver the past decade, annuities have fallen out of favor with investors. These retirement products became popular in the US during the Great Depression when potential retirees were looking for a secure income stream that would be unaffected by stock market volatility. Q2 2020 hedge fund letters, conferences and more If you’re looking for value 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