Cloudy with a chance of municipal bonds

October 15, 2019

Cloudy with a chance of municipal bonds

Climate change is real. Severe weather, flooding, wildfires and other natural disasters are being experienced with greater frequency and greater severity by many state and local municipalities in the US. In our view, this trend will continue with a greater likelihood of adverse environmental, economic and cost consequences.

Several state and local governments are planning to protect against natural disasters in the coming years and are implementing environmentally-friendly policies to try and halt the effects of global warming. Capital in the form of municipal bonds will be required to fund these initiatives and also repair damage to infrastructure.

In the face of the growing environmental threat, it is important to not only consider the geographic location of a municipality but also focus on the extent of its strategic planning, fiscal resources and financial flexibility. Investor awareness is essential in advance of mounting climate change crises and their potential impact on bond valuations for ‘at risk’ municipalities.

Dan Rabasco, head of municipal bonds, Mellon

All investments involve risk, including the possible loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.

Bonds are subject to interest rate, credit, liquidity, call and market risks, to varying degrees. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes and rate increases can cause price declines. Municipal income may be subject to state and local taxes. Capital gains, if any, are taxable.

Charts are provided for illustrative purposes and are not indicative of the past or future performance of any BNY Mellon Investment Management product.

BNY Mellon Investment Management is one of the world’s leading investment management organizations and one of the top U.S. wealth managers, encompassing BNY Mellon’s affiliated investment management firms, wealth management organization and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally.

Mellon is a global multi-specialist investment manager dedicated to serving our clients with a full spectrum of research-driven solutions. Mellon Investments Corporation (Mellon) is a registered investment adviser and an indirect subsidiary of The Bank of New York Mellon Corporation.

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