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    Municipals still are attractive at these prices levels, even after the rally that we've seen so far at the onset of 2014. The dramatic sell off that we saw in the summer of 2013 created a lot of value and actually began to pay investors to move out the yield curve, something they weren't getting paid for prior to that big sell off. Now, we've clearly given some of that back, but short-duration bonds, cash are still very expensive both on a relative basis, on an absolute basis.

    So we think that there's still a lot of value and a reason for investors to move out the curve, and if you take a look at the rate environment, it's a lot more benign than it was or at least what investors were expecting at the end of 2013, when everyone was calling for rates to move higher. We've actually seen the opposite. Rates have moved lower. Not to say rates won't move higher over the next couple of months as some of the weather-related economic data begins to be filtered back into investor expectation for rates and inflation, but nonetheless, I think the rate environments more benign, giving investors more confidence to move out the curve.

    The big focus this year is really on income, something investors forgot about last year. I think they were really examining risk in their portfolios in terms of duration and credit. They felt a lot of pain in the summer sell off, and that, I think, really, was the focus, as opposed to the tax changes that went into effect in 2013. You take a look at the Affordable Care Act, alone, at 3.8 percent, municipals are exempt from that calculation, so that alone, on top of the higher marginal tax rates, adds a lot of value.

    So I think the focus is on income. If you look at taxable equivalent yields vis-à-vis treasuries, vis-à-vis corporate bonds, very attractive. I think that's what the focus really should be on this year is how to maximize that income. Probably some caution is warranted, though. We've had a very good rally the first several months of the year, so perhaps we wait for a bit of a backup as this weather-related economic data gets stronger over the next couple of months. That perhaps creates a value to lock in better yields for a longer-term time frame.

Municipal Monthly Commentary

BlackRock's Peter Hayes, James Schwartz & Sean Carney review the month's key economic events and provides insight into their municipal bond investment strategy.

Investing involves risk, including possible loss of principal.

Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments.

There may be less information on the financial condition of municipal issuers than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. Some investors may be subject to federal or state income taxes or the Alternative Minimum Tax (AMT). Capital gains distributions, if any, are taxable.

The opinions presented are those of Peter Hayes, Portfolio Manager, member of BlackRock's Fixed Income Portfolio Management Group, as of April 3, 2014 and may change as subsequent conditions vary. Individual portfolio managers for BlackRock may have opinions and/or made investment decisions that may, in certain respects, not be consistent with the information contained in this presentation. This is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information and opinions contained in this presentation are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all inclusive and are not guaranteed as to accuracy. Past performance does not guarantee future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the viewer.

Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained visiting the iShares ETF and BlackRock Mutual Fund prospectus pages. Read the prospectus carefully before investing.

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