Municipal Bond Forum
Negative outlook on most tobacco bonds
Q
You’ve moved away from tobacco bonds (“Clouds Darkening for Tobacco Bonds“), but they have differing parameters depending on the issue. Do you dislike the higher-rated ones (“BBB,” “A”) as well?
A
James A. Klotz responds:
Although, as you say, tobacco bonds are structured in a variety of ways, our outlook is still negative in the majority of cases.
Our opinion is influenced by domestic cigarette sales projections and the national movement toward smoke-free public buildings and other areas. E-cigarettes and increasingly higher taxes on tobacco will also dampen domestic sales.
Naturally, we are more sanguine on some of the older issues, particularly if they enjoy state enhancement.
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