Animal Spirits Podcast Talk Your Book: Investing in High Yield Munis
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Jun 16, 2025 In this discussion, guest Steve Hlavin, a Portfolio Manager at Nuveen, dives deep into high-yield municipal bonds. He highlights unexpected improvements in municipalities' financial health and the complexities of investing in non-rated bonds. The conversation also covers liquidity challenges, innovative solutions like Interval Funds, and the importance of understanding tax implications. Steve urges investors to prioritize independent research and long-term strategies for navigating this intricate market.
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Strong Municipal Fiscal Health
- State and local governments are in their strongest fiscal position ever due to unexpected growth in tax revenues during the pandemic.
- Stimulus funds were arguably more than necessary since municipalities weathered revenue drops better than expected.
Municipal Budgets Must Balance
- Unlike the federal government, municipalities cannot sustain deficits indefinitely and must balance budgets.
- Municipal bond yields are influenced more by fund flows and issuance than deficits.
Inflation and Policy Push Supply
- High supply in municipal bonds is driven by inflation increasing project costs and policy factors like potential tax exemption changes.
- Issuers rush to market amid fears of higher future rates, pushing record bond issuance.