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Text on screen: Daniel J. Ivascyn, Group Chief Investment Officer
Ivascyn: After a really, really tough 2022, where we saw muni yields rise and in some cases, particularly up the yield curve, rise quite sharply, we see a lot of value within the municipal and the tax free investing space.
Text on screen: 1. High yields
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Number one, yields are quite high in a historical context, slightly off the absolute highs we saw a few months ago, but still very, very attractive from a long term perspective. Then the really good news, of course,
Text on screen: 2. Declining inflation
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is that inflation is beginning to decline. A more subtle point within the municipal market versus the taxable market is that you still have
Text on screen: 3. Steep yield curves
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quite steep yield curves, meaning by buying longer maturity municipal bonds, you pick up a significant relative yield advantage versus what you see in the taxable space.
Given the significant economic uncertainty, there is the ability to leverage the fact that municipal bonds, both at the investment grade level as well as the high yield segment of the distribution, have typically been much more
Text on screen: 4. Resilient credit performance
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resilient from a credit performance perspective. And then finally, a lot of municipalities, even some of the areas of the market with lower ratings,
Text on screen: 5. Strong initial conditions
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have pretty strong initial conditions. So bottom line, I know it’s been a rocky road for interest rate sensitive segments of the opportunity set, but we do think that opportunities are looking a lot brighter, both from a yield and a total return perspective across this asset class.
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