Uncovering value in today's muni bond market

As a team that focuses on bond-by-bond credit selection, the Delaware Investments municipal bond group emphasizes the lower portion of the investment grade spectrum. Greg Gizzi talks about finding value within that part of the credit curve.

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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.


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