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.

Insurers stepping up

The insight in your article ("Amid Detroit Crisis, a Key Player Emerges") applauding the virtues of bond insurance brings to light that with the exception of AGM, National and BAM, all other bond insurers are still in a serious financial state. This is largely due to their ill-advised venture into insuring toxic mortgages. Would you care to comment?

Wait for better yield?

Is your strategy always to buy the best yield possible and hold? Is there ever a reason to sell or wait to buy for better yield? In the current environment, conventional wisdom says that I should construct a bond ladder, don't go too long in search of yield, etc. But if I am buying for income and a better return for the amount of risk, is there an argument for buying shorter-term munis, maybe less than seven years?

Detroit plan subject to court ruling

Excellent article ("Investors in Michigan Munis Strike Back"), clarifying the unintended consequences of the Detroit approach to bankruptcy. In addition to the obvious chilling effect this is having on the municipal bond market in Michigan, I reckon it is also having a negative impact on the broader muni bond market. If the current plan goes through, it is a game changer for muni bonds everywhere.

Focus on why you buy muni bonds

We are New York residents. Currently, our muni bonds are decreasing in value. Since January 2013, our portfolio has lost about 3% of its value. Our advisor has instructed us to stand pat as we are still receiving dividends. What would you suggest we do?

Ignore the roller coaster

Do you think, theoretically, that the muni market would be better off, or at least far less volatile, without muni mutual funds? Watching outflows from munis based solely on what amounts to an equity-market mechanism seems to negate much of the advantage of owning munis. Fund managers start selling to cover potential redemptions, and share prices fluctuate like a roller coaster, having nothing to do with the underlying assets.

Insurers pledge to honor insured Detroit bonds

Are the insurance companies going to come through and honor their word – to be there no matter what – with interest and principal? This better be the case. Is your company hearing anything or putting the pressure on them?

Dont let short-sighted decisions obscure the bigger picture

Regarding your article on Detroit ("Investors in Michigan Munis Strike Back"), I think Michigan’s governor needs to understand the impact of his short-sighted decisions. Every day it seems to get worse in the muni market. I keep reading that a rally will occur soon. What is your opinion?

Detroit and 'Whoops' not similar

Are there any similarities between Detroit's situation and the “Whoops” (WPPSS) muni bonds from the ‘70's?

Ratings agencies cautious on Puerto Rico

Though there have been numerous articles on how the new government of Puerto Rico has made great strides in fixing its pension problem and operating budget, the ratings agencies refuse to increase their credit rating and seem to focus on the negative. Where do you think the bottom is on Puerto Rico bonds and how will their electric bond sale affect the market?

Why market insight matters

I own Detroit General Obligation water bonds insured by National. My financial adviser told me that as the city’s problems wind through the courts, Detroit won’t pay timely interest and only my principal of $40,000 will continue to be insured by National. The price of these bonds stands at 86.999 as of July 22, 2013, and continues to go down every day. Your thoughts?
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