MacKay Municipal Managers Announces Top Five Municipal Market Insights for 2016

PRINCETON, N.J.--(BUSINESS WIRE)--

MacKay Municipal Managers^™, the municipal bond team of fixed income investment advisory firm MacKay Shields LLC, today delivered its top five municipal market insights for 2016. Key highlights include:

1. Market Disruptions Likely – Both Probability and Severity will be Elevated.
   Active management of municipal assets will be essential, as we expect market volatility to rise. We believe uncertainty tied to the timing and degree of The Federal Reserve Board's policy adjustments will cause disruptions along the yield curve. Global economic conditions will likely blur the outlook in the United States and further contribute to market dislocations. In our view, selected credit events in the municipal market, while anticipated, will generate incremental volatility.
2. Market Technicals to Drive Returns - Technical Conditions to Play a Greater Role.
   We believe supply, demand, and bond structure will impact returns to a much greater degree than in the recent past. We expect the municipal market to feel the effects of technical conditions in other markets, as investors react to changing conditions across their entire portfolios.
3. Revenue Bonds Outperform – Defined Revenue Streams Preferred Over Pension Uncertainty.
   We believe investors will gravitate to the well-defined cash flow streams securing revenue bonds and away from general obligation debt. Pension issues will likely continue to cause uncertainty over the fiscal health of general obligation issuers. New Governmental Accounting Standards Board reporting standards may reveal that state and local governments, even those that have previously addressed their pension issues, still face risks or remain under funded.
4. Transportation Sector Outperforms – Spending and Usage to Increase.
   The 2015 Federal Transportation Bill provides five years of funding for much-needed infrastructure programs. Election-year positioning should motivate Congressional support for legislation that promotes job-heavy projects. In addition, we believe continued economic growth and low energy prices will lead to higher usage of toll roads, airports, and other port facilities.
5. High-Yield Municipals to SPRING Ahead, But Then Investors Should FALL Back to Investment Grade.
   We believe high yield municipal bonds should outperform during the first half of the year, as investor demand for yield continues. However, in the latter part of the year, we believe investment grade should outperform, as the flattening yield curve causes refundings to accelerate. Active management will be essential to capturing the performance in the relative-value shift.

"The key to managing municipal portfolios in 2016 is being cognizant of the movements that influence municipal liquidity. We must take into account factors such as more aggressive cash flow demands on municipal mutual funds and the credit implications of lesser liquidity that will impact trading behavior. Given these market dynamics, we believe our approach to managing liquidity in 2016 will create investment opportunities," explained MacKay Municipal Managers^™ co-heads John Loffredo and Robert DiMella.

MacKay Municipal Managers^™ manages $14.5 billion as of November 30, 2015. MacKay Municipal Managers^™ is subadvisor to the MainStay High Yield Municipal Bond Fund (MMHAX, MMHIX), which was recently recognized by Money Magazine as a best-in-class fund for 2015 in the "Tax Exempt Bond Category".

The team also subadvises the MainStay Tax Free Bond Fund (MTBAX, MTBIX), MainStay Tax Advantaged Short Term Bond Fund (MSTAX, MSTIX), MainStay California Tax Free Opportunities Fund (MSCAX, MCOIX) and the MainStay New York Tax Free Opportunities Fund (MNOAX, MNOIX). The team is co-headed by John Loffredo and Robert DiMella, who have worked together for over 20 years managing municipal bonds, including investment grade, high-yield and state-specific strategies.

To view the full year outlook, please visit: https://www.nylinvestments.com/mainstay/products-and-performance/tax-advantaged-solutions.

About MainStay Investments

With $87.64 billion in assets under management as of November 30, 2015, across retail mutual funds, exchange traded funds (ETFs) and variable product sub-accounts, MainStay Investments is the mutual fund and ETF distribution arm of New York Life Insurance Company. MainStay provides access to a powerful mix of autonomous, institutional investment managers, delivered by experienced professionals who understand the needs of today's investors. For more information on MainStay Investments, please visit www.mainstayinvestments.com.

MainStay Investments® is a registered service mark and name under which New York Life Investment Management LLC does business.

About MacKay Shields LLC

MacKay Shields LLC ("MacKay") serves as the Fund's investment subadvisor. MacKay is an indirect wholly-owned subsidiary of New York Life Insurance Company and a wholly-owned subsidiary of New York Life Investment Management Holdings LLC. MacKay is a fixed-income focused investment management firm with $91.1 billion in assets under management as of November 30, 2015. MacKay manages fixed income strategies for high-net worth individuals, institutional clients and mutual funds, including unconstrained bond, global high yield, high yield, high yield active core, municipal high yield, short duration high yield, low volatility high yield, municipal short term, core investment grade, municipal investment grade, core plus, core plus opportunities, convertibles, emerging markets credit, and bank loans.

For more information about MainStay Funds®, call 800-MAINSTAY (624-6782) for a prospectus or summary prospectus. Investors are asked to consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus or summary prospectus contains this and other information about the investment company. Please read the prospectus or summary prospectus carefully before investing.

The MainStay Funds® are managed by New York Life Investment Management LLC and distributed by NYLIFE Distributors LLC, 169 Lackawanna Avenue, Parsippany, NJ 07054, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.

MainStay Investments® is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services.

Definitions:

Flattening yield curve occurs when yields on long-term Treasury bonds are falling faster than yields on short-term Treasury bonds. The area between the yields on short-term bonds and long-term bonds decreases, making the yield curve appear less steep.

Yield curve is a line that plots the interest rates of bonds with equal credit quality, but different maturity dates.

Active management is the use of a human element, such as a single manager, co-managers or a team of managers, to actively manage a fund's portfolio. Active management strategies typically have higher fees then passive management.

Revenue bonds are municipal bonds that finance income-producing projects and are secured by a specified revenue source.

General obligation bond is a municipal bond backed by the credit and "taxing power" of the issuing jurisdiction rather than the revenue from a given project.

About risk:

Mutual funds are subject to market risk and will fluctuate in value.

A portion of a municipal fund's income may be subject to state and local taxes or the Alternative Minimum Tax. Funds that invest in bonds are subject to interest-rate risk and can lose principal value when interest rates rise. Bonds are also subject to credit risk, in which the bond issuer may fail to pay interest and principal in a timely manner. High-yield securities (commonly referred to as "junk bonds") are generally considered speculative because they present a greater risk of loss than higher-quality debt securities and may be subject to greater price volatility. High-yield municipal bonds may be subject to increased liquidity risk as compared to other high-yield debt securities.

Municipal securities risks include the ability of the issuer to repay the obligation, the relative lack of information about certain issuers, and the possibility of future tax and legislative changes which could affect the market for and value of municipal securities. Such uncertainties could cause increased volatility in the municipal securities market and could negatively impact the Fund's net asset value and/or the distributions paid by the Fund. Securities purchased by the Fund that are liquid at the time of purchase may subsequently become illiquid due to events relating to the issuer of the securities, market events, economic conditions, or investor perceptions.

This material contains the opinions of the MacKay Municipal Managers^™ team of MacKay Shields LLC but not necessarily those of MacKay Shields LLC. The opinions expressed herein are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and opinions contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Any forward-looking statements speak only as of the date they are made and MacKay Shields assumes no duty and does not undertake to update forward-looking statements. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of MacKay Shields LLC. ©2015, MacKay Shields LLC.

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