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Munis firmer, USTs rally to start holiday-shortened week

BY SourceMedia | MUNICIPAL | 03:53 PM EDT By Jessica Lerner

Munis were firmer Monday, underperforming a U.S. Treasuries rally, as equities ended mixed.

This strength comes after another "challenging week" for the muni market, which continued to deal with ongoing macroeconomic uncertainty and somewhat heavy supply, said Daryl Clements, a muni portfolio manager at AllianceBernstein (AB).

The new-issue calendar, though, takes a "breather" this week with the shortened week, with nearly $7 billion expected to price, which "should be more manageable and aided by March reinvestment cash from maturities and coupon payments," he said.

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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