Municipal bond funds may slightly be feeling the effects of negative headlines coming from Puerto Rico’s financial problems. Set those aside and the market looks both inexpensive and attractive, said Tom Metzold, Senior Portfolio Manager for Eaton Vance. ‘When you look at it compared to Treasuries and other fixed income investments it’s still pretty cheap,’ said Metzold. ‘And the supply demand dynamic is still pretty positive in the sense that more bonds are getting called, redeemed and matured than there are new bonds getting issued.’ Metzold oversees the Eaton Vance High-Yield Municipal Income fund, which is up 30 basis points year-to-date and yields 4.24%, according to fund-tracker Morningstar. Metzold will be leaving Eaton Vance after 28 years as a money manager to lead MBIA’s secondary markets business. He said his experience in the industry helped him get out of problematic uninsured Puerto Rican bonds early on. ‘We still own some insured Puerto Rico because we believe the combination of the fundamental return on what you are going to get plus your insurance is going to be money good,’ said Metzold, adding that he still expects the market to be a ‘roller coaster ride’. Metzold said the bond insurers are making a comeback after losing their I’m triple A status in the wake of the financial crisis. In fact, he said most of them have money for paying claims in excess of what it was pre-financial crisis based on the old ratings criteria.
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