Point of View With Peter Hayes

The stars aligned for the municipal bond market in 2014: Low supply amid solid demand, improving fiscal conditions among state and local issuers, and a broad drop in interest rates (and rise in bond prices) helped make munis one of the top-performing fixed income asset classes of the year. Many of the favorable dynamics remain firmly intact heading into 2015. But even though the sun doesn’t set on munis in 2015, BlackRock's Peter Hayes cautions that 2014 was in many ways a gift that can't keep giving indefinitely. What may be in store for 2015?:

  • A return to "normal." The Fed is poised to set on a course to normalize interest rates in 2015 after six years of excessively easy policy. And muni returns are likely to ease from their 2014 euphoria and approach more typical levels.
  • Continued strength, technically speaking. While muni supply may pick up versus 2014, demand for high-quality income-producing assets is voracious in the current environment. That makes for a good technical backdrop that should support muni pricing.
  • Pension pain and hope for remedies. Pension liabilities present the biggest long-term fiscal challenge for many state and local governments.

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Strategic Municipal Opportunities Fund

Monthly Municipal Commentary

BlackRock's Peter Hayes, James Schwartz & Sean Carney review recent market events and provide insight into their municipal bond investment strategy.

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.

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.

This material 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 opinions expressed are those of the investment professional profiled as of January 2014, and may change as subsequent conditions vary. Individual portfolio managers for BlackRock may have opinions and/or make investment decisions that, in certain respects, may not be consistent with the information contained in this report. The information and opinions contained in this material 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 is no guarantee of future results. 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 reader. Investment involves risks.

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