FMSbonds, Inc.’s Municipal Bond Forum is an exclusive opportunity for investors to submit questions and comments on the bond market or to respond to one of our articles.
To participate, just send us an e-mail. Be sure to include your name or initials and your state of residence. Posted e-mails may be edited for length and clarity. If you prefer a private response, please note that in your e-mail. Responses are provided by James A. Klotz, president and co-founder of FMSbonds, Inc., a municipal bond specialist for more than 35 years, and other members of the firm as noted.
Postings are listed by date. If you have any questions, please call us at 1-800-367-2663 or e-mail us.
I was glad to see your Bond Forum answer entitled, “Insured Puerto Rico Muni Bonds in Demand,” which confirmed my belief that these were worth holding. My question is, if the interest on a Puerto Rico bond is being paid by, say, Assured Guaranty Municipal but the bond is callable, is there any way on earth that bond can be called? I would think not, which would in essence also bring “call protection” to these bonds.
M.M., Tennessee
We moved from Florida to California two years ago. We own municipal bonds from Florida, New Jersey, New York and Pennsylvania. I am told we now have to declare $20,000 as income as non-California munis are not tax deductible. We are in our 80s and this will be devastating. Can this be true?
J., California
Is MBIA in good financial shape and are they able to withstand a complete default from Puerto Rico? I’d like to know before I buy bonds.
J.G., Florida
We’re waiting with bated breath for your reading of the Senate’s version of the tax overhaul bill passed last week. Did the Senate version eliminate or reduce the exemption for private activity bonds? Will existing PABs be grandfathered or will any new rule apply to them, too? Specifically, what kind of bonds are effected? When we buy bonds, what do we look for to determine if they’re PABs?
D.H., Virginia
I’m a California resident paying a 12% state tax. Do you think it makes sense for me to buy municipal bonds from other states?
J.M., California
What’s the upshot of President Trump’s “pledge” to wipe out Puerto Rico’s debt and how will this affect my Puerto Rico bonds? How far will the insurance on my Puerto Rico bonds carry me?
R.V., Massachusetts
If corporate tax rates were reduced to, say, 25%, do you think the municipal bond market would be OK in terms of demand?
K.S., Florida
After the Fed raised the benchmark lending rate by .25% last week, why are municipal bond rates off .15% across all maturities and credit ratings?
J.T., Florida
I have a laddered portfolio of California municipal bonds, many of which were purchased in 2007 at or around par. Most have coupon rates of 5.00% and are being redeemed this month. In order to reinvest in similar munis, I had to pay a 16% to 20% premium. In your article, “Summer Forecast: A Muni Redemption Flood, Supply Drought,” you said investors can often enhance their tax-free income when bonds are redeemed. With regard to these 2007 bonds, I don’t see how redemptions aren’t an issue or how reinvesting in similar bonds can enhance my tax-free income. In the decreasing-rate environment that has been in place for around 30 years, shouldn’t investors hope that older bonds are not redeemed?
L.C., California
Moody’s and Standard and Poor’s proved their fallibility in 2008 and before.
Their ratings are useless.
Why should I trust them now?
M.R.
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