A surge in the municipal-bond supply creates the best buying opportunity in two years, said Michael Pietronico, chief executive officer at New York-based Miller Tabak Asset Management.
Oversupply has meant a slow market and higher yields as issuers rush to sell federally subsidized Build America Bonds before the program’s expiration at year’s end, Pietronico, who manages $330 million in municipal holdings, said in a telephone interview today.
“Rates will drop noticeably once the pressure to issue Build America Bonds has passed,” Pietronico said.
The U.S. pays 35 percent of the interest on taxable Build America Bonds. The program, created as part of President Barack Obama’s economic stimulus, hasn’t been extended.
The secondary market, in which previously issued bonds are bought and sold, showed top-rated debt yields at 4 percent in the 10-year range, Pietronico said. Yields could begin to fall in mid-December, Pietronico said.
“Rates will stop going up when money starts coming out of the stock market and into the muni market, which we’re seeing the beginning of now,” Pietronico said.