Evolving municipal bond market makes compelling case for active management

The classic strategic reasons to own municipal bonds still hold true: They generally have low correlations to other asset classes and offer a meaningful tax advantage to investors — features that are unlikely to change in the near term. However, the municipal bond market has experienced a significant shift over the past several years through the virtual demise of municipal bond insurance and the stress of highly constrained federal and state budgets. This white paper from Putnam Investments will examine how these changes in the municipal bond market have had an impact on the evaluation of municipal securities, whether it makes sense to invest in municipal bonds today, and how investors might need to change the way they implement their investment strategies as a result.