Uncovering value in today’s muni bond market

Uncovering value in today’s muni bond market

Greg Gizzi
Senior Portfolio Manager
Municipal Fixed Income

It’s a particularly difficult market for a credit shop like Delaware because anything that offers excess yield in the current market with the market being near historical low rates, looks attractive to us. So we fight hard to maintain our discipline and simply not buy credit for credit’s sake. We look at each individual investment, or potential investment, that goes into the portfolio on an individual basis, judging each and every one on its own individual merit.

We are seeing value in three specific areas thus far. And despite each one having its own set of concerns, we do see ample return in the healthcare segment, and specifically hospitals and CCRCs, or continuing care retirement communities. In the education sector, charter schools and a related segment, student housing bonds have offered us nice returns. And lastly, in the corporate and IDR space, we find MSA tobacco, or those tobacco issues backed by the master settlement agreement, as offering particularly good value here in the market.

On screen text (Optimistic about tomorrow’s muni bond market)

We remain optimistic for the future. The fact is that cities and local municipalities have a backlog of infrastructure projects that need to be addressed. And realizing that we’re in a period where there continues to be belt-tightening mentality, or fiscal austerity, eventually this backlog of infrastructure projects will be addressed. So I’m talking about the replacement of bridges, repairing of roads, things of that nature. Water, in particular, is an extremely important area, one that threatens the economies of many states in the southern and western part of the country.

One of the areas we’ve seen innovation is in transportation, particularly toll roads where we have public-private partnerships, or we call them P-3s. And I suspect we’ll see some of these projects be financed in the traditional way, but many of them may have new, innovative ways of financing their projects. And P-3s, I believe, will be one of the ways we see these deals come to market in other areas.

The views expressed represent the Manager's assessment of the market environment as of October 2014, 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.

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.

Substantially all dividend income derived from tax-free funds is exempt from federal income tax. Some income may be subject to state or local taxes and/or the federal alternative minimum tax (AMT) that applies to certain investors. Capital gains, if any, are taxable.

Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by visiting delawarefunds.com/literature or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.


Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

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