Municipal bonds are a “fantastic deal” after the recent sell-off, said Matt Fabian, managing director of Municipal Market Advisors.
“Buy them now, absolutely, buy them now,” Fabian said today during a television interview on “Bloomberg Surveillance” with Tom Keene. “If you’re looking for income, and most investors are, this is an opportunity.”
States and local governments are set to sell about $12.6 billion in debt this week, including $4.2 billion in Build America Bonds, both the highest in three weeks, according to data compiled by Bloomberg. The Build America program, scheduled to expire Dec. 31, provides a 35 percent federal interest-rate subsidy to issuers.
Investors have been concerned by headlines referring to budget woes and that has “split the market in half,” said Fabian, whose research firm is based in Concord, Massachusetts. As a result, they are left with two options: high-yield, high- risk bonds such as California’s and low-yield, low-risk securities in AAA rated states such as Utah.
“I think that munis are a fantastic deal,” Fabian said. “Muni buyers are income buyers and don’t buy when there’s no income but right now there is.”
With supply surging, average yields on the bonds climbed to 6.26 percent on Dec. 3, the highest since April 8, according to the Wells Fargo Build America Bond index.