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Time value on municipal bonds yields


I always enjoy your articles. They’re concise, informative and most interesting. With regard to “Rethinking Your Reinvestments,” as a customer of FMSbonds, my view is that going long with yields at 4.00% to 4.50% may not be advantageous. While tax-free income is desirous, one must take into account real inflation and/or the time value of money, which effectively erodes the real value of the interest payments and their purchasing power. In other words, bonds generating $450 per $10,000 today won’t have the same effective value in, say, 2048 or in 2053, etc. Can you comment on this?

W.H., New York


James A. Klotz responds:

First, thank you for your kind words about our articles.

Your question is very interesting. It involves a topic that we discuss often. In fact, you prompted us to write an article specifically addressing this issue.

Please see “Tomorrow’s Value of Today’s Municipal Bond Yields.”

Sep 7, 2023

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