We are counting down to the fed's march Meeting of course we know just about Five weeks away from today we're talking About the 10-year yield and let's do all Of this with sean carney of course he's The head of municipal strategy over at Blackrock and Sean how are you thinking about the big Gyrations a treasury almost hitting two Percent and then the impact of that on Your world of munis Yeah good question obviously we've seen A bit more volatility to start off the Year Particularly in rates and while rates Have rejected two percent thus far in 2022 it'll be interesting to see if that Ceiling remains as we get closer to Liftoff obviously muniz uh have have you Know not been immune from what we've Seen so broad muni's off about two and a Half percent year-to-date but that's Compared to a u.s egg that's down three And a half and corporate Ig down you know just north of four and A half percent so uh directionally Similar just just a bit more defensive In the muni space than other investment Grade fixed income how does that Defensiveness play out a lot of people Said that in anticipation of the federal Reserve maybe you do high yield with the Shorter or lower modified duration or You shorten up at least on the credit
Curve how are you thinking about that Yeah so if we look back at rate hiking Cycles in the past if we think about the 0-4-0-6 cycle muni's outperformed us Treasuries by north of 300 basis points And then again in the 15 to 18 By north of 500 basis points and that's Because of the the higher coupon the Shorter call defense of nature i think That with what we've seen year to date It's okay to probably extend iteration Out a bit and while we've had kind of an Up in quality bias and we'll look to add Back to some of the lower quality Sectors with uh you know the the change That we've seen in valuations last time We talked on this this exact Um Uh program we talked about the Unsustainable nature of valuations at That time and the market has done a good Job resetting so we feel as though the Short-term pain in q1 will be rewarded With longer term gains and a better Entry point here once we get out of q1 You know sean we just have less than a Minute what about the pandemic recovery Trade airports public transit how are You thinking about that Yeah again a bit more defensive when we Think about sectors you know thinking More about kind of the structure of the Market Uh obviously transportation sector
Education so on uh but we continue to You know to focus on more the defensive Sectors and again favor higher coupons Shorter calls you know the pandemic Recovery is something that kind of comes And goes you know as we saw with the Omicron variant you know who knows if we Were to see you know another doesn't Mean we're fully out of the woods but it Does feel as though it's backed away From from the headlines as we saw with The jobs report just this past friday so Favor and higher quality bonds but you Know willing to look at and select lower Credit uh quality as valuations adjust
