(Bloomberg) — Debt for health-care projects is beating all areas of the $3.7 trillion municipal market.
Muni bond investors seem to be betting on the possibility that the Patient Protection and Affordable Care Act (PPACA) will reduce the number of non-paying patients.
The managers of the S&P Dow Jones Indices track eight types of revenue bonds.
Health-care securities, including securities issued by nursing home companies, have earned 6.4 percent this year.
The bonds in the health-care segment did better than the bonds in any other segment that S&P Dow Jones tracks.
The average return was 5 percent.
Last year, the health-care segment and the entire market fell 2.6 percent.
With municipal interest rates at 11-month lows and defaults in decline, investors have more appetite for the lower-rated obligations that hospitals typically issue.
Investors also are hoping the PPACA coverage expansion provisions will reduce the number of uninsured patients hospitals have to treat.
PPACA “provides a level of stability to the marketplace in terms of knowing that the majority of people are actually covered and you’re not going to have this charitable-care component that really varies from year to year,” said Lyle Fitterer, a managing director who helps oversee $31 billion of munis at Wells Capital Management.
The share of American adults without insurance fell to 13.4 percent in April, from 15.6 percent last quarter, Gallup said yesterday.
Gallup attributed the drop to PPACA coverage expansion programs.