Municipal Bond Forum

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.
Y., Virginia

James A. Klotz responds:

In our report, we discussed a new tobacco system that could ultimately boost the fortunes of the companies that back tobacco bonds.

While it’s too early to comment on the market effects of this product, we would advise caution.

Most tobacco bonds are rated below investment grade and considered to be speculative. At 76 years old, we suggest risk aversion should be your first priority.