Munis Are a Big ‘Buying Opportunity,’ Bond Manager Says

Why is this record issuance happening right now?

According to Schwartz, “I think all of a sudden issuers looked at it and said, ‘We want to issue before the election, and we want to issue before the Fed in December.’ So all of a sudden everybody jumped on there and did it.”

Because of this overwhelming amount of supply, the municipal market has “cheapened up.”

“The supply is overwhelming that demand factor on a national basis,” Schwartz said. Adding, “We think right now, because of this supply, it’s a buying opportunity. If anybody is considering going into the municipal market in the next three, four months, we would say go in now. Go in now, or beginning of November.”

By December, Schwartz doesn’t think supply will still be “overwhelming.”

“All of a sudden that supply-and-demand factor changes and that’s where we think some of that performance is going to come,” he said. “Get in now and then I think over the next few months, you’re going to see some good, relative performance.”

Schwartz doesn’t expect demand for munis to slow down, largely because he doesn’t expect taxes to lower over the next few years.

“We just think the demand factor is going to be strong, remain strong,” he said. “Maybe it’s not going to have flows like we did this year, but still individuals are going to continue to invest in municipal bonds. Especially with taxes as high as they are. We don’t really see the realistic possibility for tax reform any time in the near future – regardless of who wins the presidential election.”

For high-net-worth individuals, in particular, Schwartz sees munis as an attractive investment.

“We think people in higher tax bracket should always have a core holding in municipals,” he said.

— Related on ThinkAdvisor:

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• Despite Strong Muni Market, GO Munis Turn Risky: BlackRock