Municipal Bond Forum
Diversifying your muni bond portfolio
Q
In your article (“State of Issuers Aids Robust Muni Market”), you said New York and California account for about one-third of the municipal bond market. As California has announced an unexpected shortfall in tax revenues collected, is there any reason for concern over a possible default on bonds from the state?
A
James A. Klotz responds:
As we also mentioned in the article, during the pandemic, states benefited greatly from federal aid and unanticipated levels of revenue. The states prepared for a slowdown and planned accordingly.
Standard & Poor’s reported that the majority of states built up their reserve levels, California included.
As you know, all investments contain some degree of risk, and this includes municipal bonds.
Although California has a substantial state income tax on out-of-state bonds, your concerns can be assuaged by diversifying to other states for future purchases or seek a higher degree of security by buying insured bonds.
Start here.
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The responses provided in this forum are meant to address specific questions posed by investors about their municipal bonds and to provide market insight for our general audience. Please note, your investments, objectives, results and experience may differ significantly. Our answers and any potential strategies discussed should not be construed as a solicitation to buy nor sell any security or investment product. All investing entails risk.
