Muni Bond Expert Talks Black Monday, Puerto Rico

Cate Long was recently a guest on #PreMarket Prep, a daily trading idea radio show hosted by Joel Elconin and Dennis Dick. Tune in to the daily broadcast live Monday-Friday at 8 a.m. ET here.

Trading municipal bond funds during a massive market wide sell-off like the one seen on Monday may not be a top priority for most investors. However, Cate Long, a municipal bond expert and former contributor to Reuters, was a guest during Tuesday's #PreMarket Prep to offer her insights on how investors can follow the unique space. Long stated that during a tumultuous day like Monday, she looks at the 10-year Treasury as many investors sell their positions in equity only to buy the Treasuries. However, she cautioned that many of the related exchange traded funds are illiquid and not recommended for active traders. In addition, day traders looking for indicators are cautioned that the Treasury yield serves more of a "spot to spot basis" on how the market is performing and not a real-time indicator. Municipal bond funds also don't trade actively and those that do, such as Nuveen Municipal Value Fund Inc NUV is "somewhat liquid" but there exists "distortions in the pricing." Long also discussed Puerto Rico's ongoing debt situation, noting that the government has been successfully paying its debt except for one class – the Public Finance Corporation in which it defaulted on a $58 million payment, but has yet to be sued. She continued that taxes has been raised recently in an attempt to collect additional revenue and will implement restructuring initiatives, labor, education and welfare reforms. "They're [Puerto Rico's government] trying to do a good job in starting to get more information out because historically Puerto Rico has been a terrible issuer of disclosure and their financial reports have generally been two years late," Long said. "It's really hard for people to have a view but they are trying to improve that now so people have a little more information."