USAA Investments’ corporate bond portfolio manager Kurt Daum said taxable municipal-bond deals are offered in tranches that are a fraction of what is sold in the corporate bond space.
“You’re like, well, I’ll take all of it,” Daum said. “And instead of getting all of it, we’ll get one million of each. The amount of supply is much harder to get used to.”
But banks expect that states and local governments will keep eschewing the traditional tax-exempt market as long as interest rates stay low. Barclays Plc strategists said this week that sales could rise as much as 30% next year to $90 billion.
“The more opportunities for us to choose from, the better it is for us,” Arvind Narayanan, co-head of investment-grade credit at the Vanguard Group.
This article was provided by Bloomberg News.