馃攳
CNBC Muni Money w/ Michael Zezas: March 22, 2022 - YouTube
Channel: unknown
[0]
idea of a potential half point hike at
[2]
the next fed meeting picks up steam
[3]
investors have been caught a little
[5]
flat-footed by the flattening yield
[6]
curve and that's spreading to the
[8]
municipal bond market as well my next
[10]
guest says quote modern monetary
[12]
uncertainty is fueling volatility there
[14]
joining me now is michael jesus he's u.s
[16]
public policy strategist at morgan
[18]
stanley michael it's good to have you
[20]
and and walk me through the rituals that
[22]
you've been experiencing there
[25]
yeah melissa i think the the the journey
[26]
the muni market's been on this year was
[28]
it started the year quite rich
[30]
probably under appreciating the
[32]
challenges that the fed had in front of
[34]
it to deal with inflation the really
[36]
complicated
[37]
path that was gonna have to follow in
[39]
fact the fact that the fed was really
[40]
gonna have to own the option to change
[41]
its mind quite a bit if the fed owns its
[44]
opponent changes mine that means bond
[45]
market volatility because the bond
[47]
market is short that option
[49]
and when you have elevated volatility in
[51]
bond markets that interrupts the demand
[53]
channels for the muni market you see
[55]
mutual fund outflows and the media
[57]
markets corrected quite a bit as a
[58]
consequence now none of that tells you
[60]
that credit quality um is poor but it
[64]
does tell you that we've got some
[65]
technical challenges in the market so i
[66]
think the conundrum for the investor now
[68]
is that you are probably being fairly
[71]
compensated for credit risk which is
[72]
pretty stable
[74]
but
[75]
as the fed continues down this path
[77]
risks are probably skewed to
[79]
risk premiums saying higher maybe even
[81]
elevating a bit
[82]
why is it that the curve
[84]
more so than just the outright levels of
[86]
yields or a headwind from unis
[88]
well i think for us the curve is a
[90]
representation of the fed's challenge as
[92]
opposed to the fit that could be
[94]
inverted and then version of the curve
[96]
itself being a challenge so we went back
[98]
and studied prior inversion periods the
[100]
last five uh to be specific you didn't
[103]
really see a difference in muni risk
[104]
premium yields relative to treasuries
[106]
before or after
[108]
but
[109]
the the the inversion itself speaks to
[111]
what the fed is trying to do which is
[112]
the challenge an inflation dynamic which
[115]
is uncertain in its cause and it's
[117]
trying to stay out ahead of inflation
[119]
taking hold in the mentality of the us
[121]
economy
[122]
and curb inversion makes sense in that
[124]
environment but that uncertainty in and
[126]
of itself drives yield volatility in the
[128]
treasury market as we've seen that
[129]
volatility is what interrupts the demand
[131]
channel it tends to make individual
[133]
investors be duration shy and use that's
[136]
why you see mutual fund outflows and
[137]
we've been showing our kind of new
[139]
favorite or our other favorite yield
[141]
curve the 10 year versus three months
[142]
which is obviously sending a much more
[144]
bullish signal in fact we're seeing a
[145]
pretty wide spread so if that curve is
[147]
right and everything's going to be fine
[149]
or at least a lot less scary than what
[151]
the others are showing or if you're an
[152]
investor in this for the long run maybe
[154]
you like the opportunities this presents
[156]
where would you be in muni's i see
[157]
airports higher ed what's your advice to
[159]
investors
[161]
yeah certainly the sectors that we think
[162]
give you a little extra premium uh and
[165]
you're being fairly compensated for risk
[166]
airports in higher education for example
[169]
and again i think the the thing to keep
[170]
in mind here is that yes while this
[173]
conundrum creates volatility in the
[175]
short term you're being fairly
[177]
compensated today if you're putting
[179]
money to work
[181]
uh so those are the two sectors that we
[183]
like and frankly because the curve is
[185]
inverting we don't think that investors
[187]
should be shying away from longer
[188]
maturities either if you're constructing
[190]
a portfolio i think you want to balance
[191]
out those longer maturities with some
[193]
shorter maturities but the typical muni
[195]
investor sometimes is duration shy uh we
[198]
think that's the wrong impulse right now
[200]
can you explain that just a little bit
[201]
further
[204]
yeah well so
[205]
if you know typical new investor they're
[207]
looking for music to be kind of um sleep
[210]
at night money
[211]
owning too much duration can feel quite
[213]
risky but if the purpose of owning that
[215]
muni bond in your portfolio is to dampen
[217]
overall volatility you want some
[220]
duration that improves your risk
[222]
adjusted returns and if you think the
[223]
yield curve is going to invert because
[225]
in our view twos are going to out yield
[227]
tens in the treasury curve it means
[229]
longer maturities are not just giving
[230]
you more carry they're going to give you
[232]
less price volatility
[234]
very interesting michael thanks for
[236]
delving into all of this and also giving
[238]
people some places to look for
[239]
opportunity we appreciate it
[241]
thanks very much michael jesus joining
[243]
us from morgan stanley all right up next
[246]
shares of robin hood are higher today as
[248]
they announce two new products in an
[249]
effort to attract users this was once a
[252]
47 billion dollar mark market cap as you
[254]
can see all the way to your right there
[256]
it's less than a 12 billion dollar
[257]
company today we're going to look at
[259]
their shift from trading disrupter to
[262]
retirement account brokerage and whether
[264]
that will pay off the exchanges back in
[266]
a moment
[268]
[Music]
[272]
muni money is sponsored by bam help
[274]
build america's future with bam insured
[276]
muni bonds
[278]
investing in america's infrastructure
[280]
drives our country forward municipal
[282]
bonds help strengthen america's backbone
[285]
and connect us all through essential
[287]
investment in local opportunities at
[289]
build america mutual we maximize the
[292]
safety and stability of municipal bond
[295]
investments that means a bright future
[298]
for our communities and investors
[300]
portfolios
[302]
learn more about the exceptional
[304]
security of bam insured bonds
[308]
your
Most Recent Videos:
You can go back to the homepage right here: Homepage