LAS VEGAS – The tax-exempt status of many municipal bonds has made them an attractive investment alternative over the years, but recent trends have some investors rethinking their portfolio mix as rates are rising, bond prices are retreating and risk-reward profiles look different in 2014 than in 2013.
The Private Bank by Nevada State Bank released the 14th edition of its High Net Worth Report series, with this month’s analysis focusing on the recent under-performance witnessed in the municipal bond market. While tax-exempt, high-yielding municipal bonds became the proverbial goose laying the golden eggs for some sophisticated investors in the immediate aftermath of the stock market tumble of 2008, they have since lost some of their appeal, and in 2013, some major municipal bond indexes reported their worst performances since 1994. Catalysts for the recent weakness in the municipal bond sector include Detroit’s bankruptcy filing in July of 2013, rising interest rates and the Federal Reserve’s recent tapering of their asset purchasing program, otherwise known as Q.E. (Quantitative Easing).
Highlights from the report include the following:
- Increased concerns regarding the performance of municipal debt started to emerge in the past year as Detroit, Mich. followed other smaller cities that filed for bankruptcy protection between 2010 and 2013. Broader economic recovery has helped to stem the tide of large jurisdictional bankruptcies.
- One local jurisdiction, North Las Vegas, remains on potential default watch lists. From a local perspective, Nevada’s municipal debt load at the state level is approximately $4.2 billion, and when combined with the local government debt total of $23.5 billion, the tally rises to $27.7 billion. On a per-capita basis, the municipal debt total in Nevada is $10,174, slightly higher than the national average.
The Private Bank publishes the High Net Worth Report monthly. Briefings will be made available on Nevada State Bank’s website at www.nsbank.com/HNWreport or by contacting The Private Bank directly at 702.855.4812.
About The Private Bank by Nevada State Bank
The Private Bank by Nevada State Bank provides a full range of personalized financial services for high net worth and high-income clients, including deposit and lending services and wealth management planning. The Private Bank by Nevada State Bank is an unincorporated division of Nevada State Bank that provides specialized banking services to significant net-worth clients. Nevada State Bank is a full-service retail bank that has been chartered by the state of Nevada and is insured by the FDIC.
About Nevada State Bank (@nevadastatebank)
Nevada State Bank, with assets of more than $4.0 billion, is the largest state-chartered bank in Nevada. A full-service bank with 50 branches statewide, Nevada State Bank offers complete range of consumer, private and business banking services. It is a subsidiary of Salt Lake City-based Zions Bancorporation (Nasdaq: ZION), one of the nation’s premier financial services companies. With affiliates in 10 Western and Southwestern states, 140-year-old Zions Bancorporation has assets of $55.2 billion. For more information on Nevada State Bank, call 702.383.0009 or access www.nsbank.com.