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Regarding your article (“Good News: ‘The Sky is Falling’”), what about taxable bonds? Though the coupons are good, they are callable at a lower rate than I paid and bought at a high premium.- C.K., California
The inability to successfully time interest rates applies to all fixed- income markets.
If you bought your bonds for the income, we suggest you stay the course.
Just wanted to know if the possible bankruptcy in Detroit will impact our holding of the Detroit Michigan Water Supply Revenue Bond. I've read that creditors were told about possible changes to the management of the water and sewage department that might impact the city's ability to pay its debt on those bonds. Moody's has now downgraded all bonds to below investment grade.- J.G., Georgia
Detroit’s emergency manager, Kevyn Orr, produced a 134-page restructuring proposal on June 14, 2013. It has not been enacted into law.
In his proposal, the $5.9 billion water and sewer bonds are treated as secured debt. He said these departments would likely be leased to a new regional authority that would then sell new bonds to pay off existing investors.
Maybe Chicken Little has returned, as your article (“Good News: ‘The Sky is Falling’”) says, but it's hard for a muni investor to ignore the fact that the emergency manager for Detroit is offering 10% of par to the bondholders that lent Detroit money in good faith, fully expecting to get repaid at maturity.- S.F., Connecticut
We understand. Fortunately, the majority of Detroit bonds, held by individual investors, are insured and the insurance companies have reaffirmed their intention to honor their obligations.
This report is produced solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This report is based on information obtained from sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed.