Buy side

President Donald Trump’s plan to rely on private prisons to house federal inmates and immigration detainees is reviving interest in the high-yield bonds that financed the lockups.

Investors are mindful of the lessons of Puerto Rico’s financial distress as they chase higher yields and the benefits of interest payments that aren’t taxable by the federal government or by any U.S. state or municipality.

In the week ended March 2, the weekly average yield to maturity of the Bond Buyer Municipal Bond Index fell one basis point to 4.25% from 4.26% in the previous week. The BB40 Index is based on the price of 40 long-term bonds.

Despite the U.S. Attorney General’s reversal of plans to end use of private, for-profit prisons, the bonds used to finance the facilities still bear the risk of abrupt policy changes, according to S&P Global Ratings.

Some analysts see an opportunity in hospital bonds, as the spreads in that sector have continued to widen even as the push to repeal the Affordable Care Act loses steam.

The weekly average yield to maturity of The Bond Buyer Municipal Bond Index, which is based on 40 long-term bond prices, fell two basis points to 4.26% in the latest week from 4.28% in the previous week.

A change in the credit cycle may be in store for the municipal bond market as the combination of wider-than-average credit spreads and a rising-interest-rate climate threaten to restrain demand for high yield paper.

Public pension funds around the country are reducing their return assumptions.

An attempt by an issuer to introduce protective language into bond documents on a taxable municipal hospital deal backfired and was thwarted by bondholders, Adam Cohen, the founder of Covenant Review, told a meeting of the Fixed Income Analysts Society on Thursday night.

The weekly average yield to maturity of The Bond Buyer Municipal Bond Index, which is based on 40 long-term bond prices, rose three basis points to 4.28% from 4.25% in the previous week.