Nisha Patel of Parametric Shares Insights on Muni Bonds, Rate Hikes, and Inflation Strategies

Nisha Patel, a senior portfolio manager at Parametric Portfolio Associates® LLC (“Parametric”), appeared on CNBC’s “The Exchange” on 27 October 2023.

Patel serves as a senior portfolio manager at Parametric Portfolio Associates LLC, an investment advisory firm registered with the U.S. Securities and Exchange Commission (SEC). She serves as a senior portfolio manager at Parametric and is responsible for overseeing the investment process and risk management for the firm’s fixed-income portfolios. Patel joined Parametric in 2009, initially as an employee of its former parent company, Eaton Vance. She began her career in investment management in 2006 as a portfolio manager with M.D. Sass and is a member of the New York Society of Security Analysts.

Patel highlighted that municipal bonds are currently at 15-year highs, particularly in the intermediate and long parts of the yield curve. For investors residing in high-tax states such as California, New York, and New Jersey, the tax-equivalent yields can be incredibly rewarding. For example, an A-rated ten-year maturity bond can offer a tax-equivalent yield of 9.5% for those in high-tax brackets. For New York City residents, this could even approach a 10% taxable equivalent.

Patel suggested that the Federal Reserve might be nearing the end of its rate-hiking cycle. She emphasized that the recent rise in rates has already accounted for strong economic data and even the possibility of an additional rate hike. According to her, the market has already factored in these variables, leading her to believe that there might be no more rate hikes or perhaps just one left.

Patel emphasized the need for investors to prepare for a period of reduced volatility. She also mentioned that clients and investors should consider positioning their portfolios for fixed income and hedge for the possibility of rates eventually coming down as economic growth slows.

When asked about the best way to invest in this environment, Patel recommended opting for separately managed accounts over individual securities or funds and ETFs. She cited the advantages of customization and potentially lower pricing as reasons for this recommendation.