Thought Leadership

Tax Efficient Fixed Income Market Commentary: 1st Quarter 2016

April 28, 2016

This commentary reviews the previous quarter and discusses our outlook and investment approach for the coming months.

Commentary Highlights:

  • Despite slow and steady growth throughout 2015, the first quarter of 2016 opened with volatility spurred by concerns about weakening global growth eventually pervading domestic markets.   
  • Given municipals’ continued richness despite market volatility and widening spreads in corporate bonds, we entered into a crossover trade for many of our strategies, exiting municipals and replacing them with comparable corporate bonds for approximately 10% of a  portfolio.  While we anticipate holding this position for up to a year, market reversions may offer opportunities to exit sooner.
  • Louisiana and Alaska’s ratings were downgraded as decreasing energy prices continue to place uneven pressure on municipal credit quality.  Congress continues to hash out legislation to create an oversight board for Puerto Rico with potentially broad restructuring powers.
  • We expect the tug of war between domestic and global forces to continue. With the outcome uncertain, we prefer a neutral duration posture for our strategies.

Please click on the link below to download the commentary.