Will low energy prices impact the
muni market?

May 23, 2016 / by Sean Carney

May 20, 2016

Beat down oil prices could carry headline risk for some corners of the muni market. Sean Carney, Head of Municipal Strategy, debunks the myths.

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    It’s certainly going to have states adapting their budgets accordingly. The fact that oil is approaching $45 is a good thing. However, that’s still down about 30 percent from where oil was just one year ago. What’s important to remember is the different size and scale of economies. How this oil price affects Texas will be different than Alaska or Louisiana. Different economies will have more flexibility than others, so it’s the headline risk that’s rising, not the default risk. 

    The other key takeaway is that the high-yield portion of the muni market has continued to see tremendous inflows and perform quite well during this turbulent time. The reason for that is the high-yield muni market has less than two percent exposure to things such as energy, oil, metals and mining. So we believe that munis continue to offer great diversification against equity and equity-like risk.

Sean Carney
Municipal Strategist, BlackRock Investment Strategy Team
Sean Carney, Director, is the Head of Municipal Strategy within BlackRock's Global Fixed Income Group. He is also a member of the Investment Strategy Team ...