As investors brace for the possibility of interest rates being held higher for longer, one investment area has actually benefitted from a high-rate environment. Nuveen Head of Municipals Dan Close joins Catalysts to discuss the benefits of investing in municipal bonds as the Federal Reserve weighs the odds of future rate cuts.
Close notes two major themes occurring. The first is rates on 10-year Treasury yields (^TNX) rising 50 basis points. He explains that this increase has affected everything in fixed income, making it 50 basis points cheaper than it was at the beginning of the year.
The second theme boils down to supply: Close states that the supply of municipals has gone up, with April and May seeing more than $40 billion in supply. He believes that this sets up the second half of the year as issuance will decrease closer to the election.
"I think we’re also going to have a very, very good technical the next two months where you’re going to have $80 billion in coupons, in maturing bonds, in all these different proceeds that recycle back to the muni market very quickly. And those are both very, very good technical backstops," Close tells Yahoo Finance.
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