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.

We Know Where Muni Rates Are Going, So Why Not Build A Bond Ladder?

I read with great interest your concerns about bond ladders, “Today’s Market Especially Cruel to Bond Ladders.” However, if long-term muni rates are about 3.00%, but today are only about 2.00%, then putting a portion into a ladder makes sense if you’re starting a long-term program today using a current lump sum. If, for example, one assumes that rates would start rising in five years then gradually plateau five years after that, wouldn’t it make sense to allocate some portion of the amount to a ladder between five and 10 years and the rest to an immediate commitment to a very long-term maturity, like 40 years? The main decision then would be the percentage allocated to the ladder portion.

Caution on Tobacco Bonds

You had an article awhile ago on tobacco bonds (“Better News Ahead for Tobacco Bonds?”) and I was wondering how they are doing. I am 76 years old and interested in income.

Limited supply of Build America Bonds

What are Build America Bonds? Are they still available to be purchased? If so, are they a good deal?

Will my municipal bonds be called?

In your commentary, “Interest Rate Reality,” you repeat the mantra, “look first for appropriate quality, then focus on yield.” You also advocate buying long-term individual muni bonds and holding them to maturity— great advice, if the bonds are not callable. The reality is that most, if not all, of the available bonds are callable, some within a year or two. Do you have any general guidelines on how to gauge whether a callable bond is or is not likely to be called?

Is there a correlation between stocks and bonds?

Why do high-yield, tax-exempt muni 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.

Today’s muni yields

Your recent article (“Municipal Bonds as Trade War Safe Haven?”), left out one very important fact - the lack of supply of creditworthy munis, at par, that have a respectable yield. I’ve seen bonds that a year ago were selling at a deep discount that are now selling at premiums reducing the yields. You’re putting a positive spin on munis despite the lack of availability, low yields, premium pricing and chasing yields maturing when we welcome the new century.

Short-term munis sacrifice income

I'm currently with (a large stock brokerage firm) where I hold over $300,000 in California municipal bonds.Income comes to $12,000 - $13,000 a year.It is one of the better plays in my portfolio.I asked my advisor there if perhaps I should increase my munis, but he was adamant that rising rates will work against them.Looking at other fixed-income choices certainly has not excited me.If I invest another $250,000 in diversified munis with a duration of about seven years, what would be your choices through FMSbonds?

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?
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