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I have many Puerto Rico munis and they are insured by Assured Guaranty. If the commonwealth restructures these bonds, what will happen afterward? Will I lose value? Will the insurer pay me back what I lose?
- B.C., California
Assured Guaranty, as all insurers, is responsible for making the full interest payments and principal at maturity. The insurance companies, however, are not obligated for any loss of market value in the interim.
I read an article that said it’s time to get out of munis. It said although they’re up 8.30% this year, interest rates are about to rise and investors are going to sell to protect their gains. What do you think?
- A.G., Illinois
We didn’t see the article, but we can say the fact that munis are up this year is irrelevant to bond investors. They don’t sell their bonds just because their prices increase.
We elaborate on this very important point here: “The No. 1 Sin of Muni Investing.”
Regarding your article, “Push is on to Include Munis in New Banking Rule,” shouldn’t banks, as part of the new liquidity rule, be allowed to hold pre-refunded bonds, bonds insured by strong insurers and short-maturity bonds in compliance with their covenants?
We couldn't agree more.
Our list however, would be considerably more extensive and would include other categories of investment-grade bonds, too.
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