BNY Mellon Bond Manager Takes More Defensive Posture
NEW YORK, January 29, 2013 — Standish Mellon Asset Management Company LLC, the Boston-based fixed income specialist for BNY Mellon, has adopted a more defensive municipal bond strategy as rising valuations have made it more difficult to identify compelling values among many types of bonds.
Standish made the comments in its recently released white paper: Municipal Bond Valuations: Is the Market Boarding a Runaway Train?
"Municipal bond investors have emerged from the tunnel of skepticism, and there is now some danger that we could be heading toward runaway valuations," said Christine Todd, president and head of tax sensitive investments for Standish.
Progress toward resolving the European sovereign crisis in 2012 boosted investor optimism and focused investors on the likelihood of a protracted easy money policy, the report notes. This contributed to falling municipal bond rates, propelling valuations of certain categories of municipals to well above their ordinary range when compared with comparable Treasury securities, according to Standish.
"In this environment, we are focusing on issues that have demonstrated liquidity throughout economic cycles and held their pricing levels during periods of dislocation in the municipal market," Todd continued. "We think the right strategic move is to give up a small amount of yield now in order to retain liquidity to take advantage of market opportunities that could arise."
Among the municipal bonds viewed favorably by Standish are infrastructure-related essential purpose revenue bonds such as those linked to water and sewer systems as they have revenue bases which are relatively immune to economic cycles, the report said. In addition, the report noted these bonds are legally and operationally distinct from other municipal operations and have independent rate setting authority.
Standish Mellon Asset Management Company LLC, with approximately $104 billion of assets under management, provides investment management services across a broad spectrum of fixed income asset classes. These include corporate credit (investment-grade and high-yield), emerging markets debt (dollar-denominated and local currency), core / core plus and opportunistic (U.S. and global) strategies. Standish also offers full service capabilities in insurance client strategies and liability driven investing. The firm also includes assets managed by Standish personnel acting as dual officers of The Dreyfus Corporation and The Bank of New York Mellon and Alcentra NY, LLC personnel acting as dual officers of Standish.
BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.4 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $26.7 trillion in assets under custody/administration and $1.4 trillion in assets under management, services $11.4 trillion in outstanding debt and processes global payments averaging $1.5 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com or follow us on Twitter @BNYMellon.
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