Market Review and Outlook 2nd Quarter 2011
Over the past six months, there was much debate about the state of public finance in America. Select industry pundits made bold predictions about the potential for widespread municipal defaults, inciting fear in retail investors and contributing to a wave of retail redemptions from municipal bond funds. Despite this panic-selling, our fundamental credit analysis led us to conclude that the first quarter of 2011 was an opportune time to be a buyer of high quality, general obligation and essential service revenue municipal bonds. This conclusion was further supported by the expectation of low municipal issuance throughout the first quarter, the attractiveness of tax-exempt yields relative to taxable investments, and the concerted efforts of select municipalities to address fiscal challenges by cutting spending and raising taxes.