Despite periods of cooling in 2015, municipals generally see support
November 11, 2015
In the following slides, portfolio manager Greg Gizzi provides a high-level view of the municipal bond market, and municipal bonds’ importance within today’s investment environment.
Municipal bonds are often expected to offset portfolio volatility and offer tax-advantaged yield. Munis have lived up to these expectations in 2015, and there is a strong case that they could continue to offer value as a new year approaches.
In his overview, Greg looks at a handful of events that have surprised some municipal market participants this year, and highlights his team’s main assumptions about market dynamics in the coming months. He concludes with several points that help make the case for investing in municipal bonds.
Charts are for illustrative purposes only.
The views expressed represent the Manager's assessment of the market environment as of October 2015, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager's views.
Carefully consider the Funds' investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Funds' prospectuses and summary prospectuses, which may be obtained by visiting delawarefunds.com/literature or calling 877 693-3546. Investors should read the prospectus and the summary prospectus carefully before investing.
IMPORTANT RISK CONSIDERATIONS
Investing involves risk, including the possible loss of principal.
Past performance does not guarantee future results.
Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.
Bond funds may also be subject to prepayment risk, the risk that the principal of a fixed income security that is held by the Fund may be prepaid prior to maturity, potentially forcing the Fund to reinvest that money at a lower interest rate.
Funds that invest primarily in one state may be more susceptible to the economic, regulatory, regional, and other factors of that state than geographically diversified funds.
Substantially all dividend income derived from tax-free funds is exempt from federal income tax. Some income may be subject to state or local and/or the federal alternative minimum tax (AMT) that applies to certain investors. Capital gains, if any, are taxable.
Bonds are rated by nationally recognized statistical rating agencies that include Standard & Poor’s, Moody’s Investors Service, and Fitch, Inc. Bonds rated AAA represent highest quality; however, the security’s credit rating does not eliminate risk.
The Bloomberg Barclays Municipal Bond Index measures the total return performance of the long-term, investment grade tax-exempt bond market.
The Bloomberg Barclays 3–15 Year Blend Municipal Bond Index measures the total return performance of investment grade, US tax-exempt bonds with maturities from 2 to 17 years.
The Barclays US Treasury Index measures the performance of US Treasury bonds and notes that have at least one year to maturity.
The Bloomberg Barclays US Aggregate Index is a broad composite that tracks the investment grade domestic bond market.
The Bloomberg Barclays US Corporate High-Yield Index is composed of US dollar–denominated, noninvestment grade corporate bonds for which the middle rating among Moody’s Investors Service, Inc., Fitch, Inc., and Standard & Poor’s is Ba1/BB+/BB+ or below.
The Bloomberg Barclays US Credit Index measures the total return performance of nonconvertible, investment grade domestic corporate bonds and SEC-registered foreign issues. All bonds in the index have at least one year to maturity.
The Barclays US Corporate Investment Grade Index is composed of US dollar–denominated, investment grade, SEC-registered corporate bonds issued by industrial, utility, and financial companies. All bonds in the index have at least one year to maturity.
The Bloomberg Barclays High-Yield Municipal Bond Index measures the total return performance of the long-term, noninvestment-grade tax-exempt bond market.