Duane: The integration across market sectors, taxable and tax-exempt, is truly seamless at Baird Advisors. We are all one team, working to produce the best, most consistent results we can for each client. All day, every day, we are sharing our thoughts on market valuations in both the tax-exempt and taxable municipal market with those who focus on Treasuries, corporates and structured products, such as mortgage-backed and asset-backed securities. At the same time, we benefit from seeing trends that develop in the taxable market that eventually find their way into the municipal market. Over the last year, we added a significant amount of both taxable and tax-exempt municipals to our taxable portfolios and funds when muni valuations were quite attractive. Municipals is a great sector to diversify into in a traditional taxable portfolio, without sacrificing yield you can add a different revenue stream of bond repayment.
Lyle: The growth in the taxable municipal market will be an ongoing source of supply for our taxable funds for the reasons Duane cites, but we are also hopeful that we may see an infrastructure bill pass this year. With the Democrats controlling both sides of Congress and the White House, and the bipartisan agreement that there is both a need and benefit from investing in the nation’s infrastructure, it may pass. It would likely need to be tied to a tax plan to provide the funds to offset the cost at least partially. If this passes, we may see a boost in municipal supply late in the year or in 2022 – both taxable and tax-exempt. There is strong demand for both. Borrowing costs are low, so now would be a good time to see this happen.
Lyle: The growth in the taxable municipal market will be an ongoing source of supply for our taxable funds for the reasons Duane cites, but we are also hopeful that we may see an infrastructure bill pass this year. With the Democrats controlling both sides of Congress and the White House, and the bipartisan agreement that there is both a need and benefit from investing in the nation’s infrastructure, it may pass. It would likely need to be tied to a tax plan to provide the funds to offset the cost at least partially. If this passes, we may see a boost in municipal supply late in the year or in 2022 – both taxable and tax-exempt. There is strong demand for both. Borrowing costs are low, so now would be a good time to see this happen.