Municipal Bond Forum

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-FMS-BOND (1-800-367-2663) or e-mail us.

How new HQLA bank rules help the muni market

You have often written about the dearth of munis available for individual investors to purchase.  Won't new bank rules regarding high quality liquid assets (“Reversal on Bank Rules a Win For Muni Bonds”) make things even worse?  Why would you applaud a big new investor that can purchase much more and make things even more scarce?

Congress’s faulty assumption on advance refunding bonds

I agree with your article, “Reviving Advance Refunding Bonds.” Why aren't issuers and bond attorneys fighting back?The government's position is that having additional tax-exempt debt outstanding in parallel with unrefunded debt diminishes federal income tax receipts. Perhaps so, but similarly, interest on U.S. Treasuries is exempt from state and local income taxation. This means that as the feds expand debt issuance, states suffer in exactly the same manner as that about which the feds are whining. Fair is fair and what's good for the goose is good for the gander. Fight back! The Government Finance Officers Association and individual states should sue.The reality for investors is that in the absence of refunded bonds, most tax-exempt bond buyers would likely choose to just invest more money in high-grade munis and not in taxable-interest securities, so the government is chasing a ghost.What dope came up with this idea, anyway?

Ignore ratios, focus on longer-term municipal bonds

I know you are a proponent of buying long-term municipal bonds. In light of the current yield curve and muni-to-Treasury ratios, what credit rating, maturity, call date and coupon rate would you recommend?

Correlation between stocks and bonds?

I read your articles and find them very interesting, but here's a question I don’t see addressed: Why do high-yield tax-exempt municipal bond funds act more like stock (equity) funds than bond funds? I thought bonds were supposed to move in a somewhat opposite fashion relative to stocks over time. My correlations don't show this negative relationship.

Bargains at the long end of the municipal bond curve

I just read your timely article, “What’s In Store For Municipal Bonds This Year” and noticed you mentioned that munis are currently a bargain. Over the last several years the AAA-muni to 10-year-Treasury ratio has ranged from the low 80s to over 100. It is currently in the low 80s. Wouldn’t that make munis, at least vs. Treasuries, expensive at this time?

Unlikely insured Puerto Rico munis would be called

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.

Out-of-state income on muni bonds

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?

How strong is MBIA/National?

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.

Fallout from possible changes to private activity bonds

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? 

Out-of-state munis for California resident

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?
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