Municipal Bond Forum
Muni market dead money? Billions say otherwise.
I own many bonds in my portfolio but haven’t bought any in more than a year. How can I justify buying bonds yielding about 2.50% when inflation is running at about 6.00%? Bonds with higher yields have steep premiums and possible calls. I think the municipal market is dead money for the foreseeable future.
James A. Klotz responds:
As you might imagine, we don’t agree. It’s also safe to say that the thousands of other investors contributing to record municipal inflows of more than $88 billion this year would also take issue with your viewpoint.
As you know, all investments must be judged in comparison to other potential investments.
What alternative have you chosen?
If it’s a money market, your rate is almost nonexistent. If it is the stock market, you are taking on considerable risk.
Keep in mind, lower rates have enabled you to produce capital gains over the past years. See our article, “Time to Take Advantage or Rising Muni Bond Values?”
Investors continue to pour money into the municipal bond market because they want to maintain their steady flow of tax-free income and sleep well at night.
You don’t mention what needs to happen for you to resume investing. But in our five decades in business, we’ve never seen anyone consistently succeed in outguessing the market.
We’re certain, though, that you won’t recoup the cost of parking your cash on the sidelines. Here’s an article that might help: “Now We Know the Cost of Muni Market Timing.”
Do you have specific criteria for bonds you’re looking for? Let us know and we’ll e-mail you bonds that fit your needs. There is no charge for this service.
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.