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Tax-Loss Harvesting With a Credit Perspective
DPC DATA’s Triet Nguyen explains how BondVALU Credit Momentum Scores support credit-aware municipal tax-loss harvesting in his IMTC guest article.
September’s municipal bond selloff created an opportunity for SMA managers to harvest tax losses and reassess portfolio credit quality. With yearend approaching, managers can use this window to review holdings, evaluate replacement securities and address changing credit fundamentals.
In his guest article on IMTC’s website, “A Credit-Aware Approach to Tax Loss Harvesting in Municipals,” Triet Nguyen, DPC DATA’s Vice President of Credit Data & Solutions, examines how managers can pursue both objectives.
Bringing credit trends into the review
Identifying a position with an unrealized loss is one part of the process. Managers also need to understand the underlying credit and how a potential replacement fits the client’s portfolio.
Triet explains how DPC DATA’s BondVALU Credit Momentum Scores help identify obligors with weakening, stable or strengthening financial trends. The sector-specific models draw on DPC DATA’s MuniCREDIT database, covering approximately 30,000 obligors without a size or rating cutoff.
Updated daily to reflect the latest publicly available financial disclosures, the scores help managers prioritize credit reviews. They also provide insight into smaller or infrequent borrowers that may lack agency ratings. Scores apply to the entities responsible for repayment, addressing the distinction between conduit issuers and underlying obligors.
Connecting analysis with portfolio decisions
For municipal portfolio managers, Triet’s article offers a useful perspective on connecting tax considerations, credit surveillance and portfolio decisions.
Read Triet’s guest article on IMTC’s website.
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