Wells Fargo Sees 'Historically Tight' High-Yield Muni Spreads

Lyle Fitter, head of global fixed income at Wells Fargo, discusses the performance of high yield credits compared to investment grade credits. He emphasizes the importance of upgrading portfolio quality in anticipation of a potential economic slowdown. The conversation also touches on state revenue improvements and the challenges posed by pension obligations, suggesting a careful evaluation of each credit's economic backdrop and risk factors.

What is Lyle Fitter's perspective on high yield credits in the short term?

• They should be completely avoided.

• They can still perform well in the next 6 to 12 months.

• They will underperform compared to investment grade credits.

• They are at risk of defaulting.

What strategy does Lyle Fitter suggest for preparing for a potential economic slowdown?

• Investing in more high yield credits.

• Shortening the duration of investments.

• Upgrading to higher-rated issues and extending duration.

• Avoiding all fixed income investments.

According to Lyle Fitter, why is it important to start upgrading the portfolio's credit quality now?

• Because investment grade credits are too risky.

• Because the economy is expected to grow rapidly.

• Because high yield credits are expected to outperform indefinitely.

• Because spreads are historically tight and a slowdown is anticipated.

What is Lyle Fitter's view on avoiding investments due to pension issues?

• He believes all investments with pension issues should be avoided.

• He recommends investing only in states without pension issues.

• He suggests evaluating each credit individually rather than avoiding them outright.

• He thinks pension issues are not a concern at all.

What factors does Lyle Fitter suggest considering when evaluating Geo credits?

• The historical performance of the state's bonds.

• The political climate of the state.

• The economic backdrop, demographic trends, and ability to raise taxes.

• Only the current tax burden.