Earlier this week on Talking Numbers, Jeffrey Gundlach referred to a liquidation cycle in bonds. He says it's over and so does Alexandra Lebenthal, president of Lebenthal & Co, a New York-based financial firm specializing in fixed income. This increase in bonds on the market means lower bond prices. That has brought about higher bond yields.
Lebenthal says there are three reasons investment-grade municipal bonds are a buy. They are:
1. The steep sell-off in bonds
Labenthal says: "You still have an opportunity to buy at yields you haven't seen in several years."
2. The taxable-equivalent yield is high
Labenthal says: "This is why investors in high tax brackets buy municipal bonds to begin with – because the taxable-equivalent yield that they would get versus a taxable investment is much higher. You're looking at taxable-equivalent yields if you live in a high-tax area (such as New York City, where you can be in the over 50% tax bracket) of over 10%."
3. Municipal bonds are cheap compared to Treasuries
Labenthal says: "Before you even factor what you would pay in tax on a Treasury bond, you can in some cases over 100% of a Treasury yield. If you go out 30 years, which I'm not recommending for the faint of heart at this point, you can get close to 110%."
But do the charts agree with Lebenthal's view?
We ask CNBC contributor with JC O'Hara, Chief Market Technician at FBN Securities, to take a look at the charts on the iShares National AMT-Free Muni Bond ETF (MUB), which tracks an S&P municipal bond index.
According to O'Hara, there are major technical levels investors should keep an eye on at when considering this ETF.
To hear more of Lebenthal's interview and O'Hara's analysis, watch the video above.