Municipal Bond Forum

I read your story, “Don’t Try this at Home,” about the ill-conceived report that recommended investors engage in “selective selling” of their munis. I had this exact situation about eight years ago with an aggressive bond trader. He was looking to make some more money and suggested I sell. I said to him, “You want me to sell all my bonds because you think I should increase their quality level and cut my income nearly in half?” He said “Yeah.” I promptly moved my money elsewhere and kept all the bonds.

M.J.

Do you believe Ambac will satisfy its obligations related to the Las Vegas Monorail issue? If not, why would any insurance company ever pay another claim? It appears that underwriting policies and collecting premiums without paying claims is a pretty lucrative business model.

M.P.

I read your article, “Time Flew, But Interest Rates Didn’t.” Six months later, do you still feel the same way? Interest rates have fallen and 5% is not available, not even on long-term (20-years-plus) bonds that are “AA” or better?

G.C., California

I recently noticed that the tax-free inventory being offered for sale by FMSbonds seems to have shrunk. I also noticed that most bonds are out to longer maturity dates for any decent returns. Many of them also seem to be carrying a heavy premium for a decently priced issue. If we intend to sell some decent holdings, it would seem that it should also work in the opposite manner. To what do you attribute the apparent shortage of tax-free new issues?

W.P., Florida

Your article, “Off the Table, or Not“, discusses whether the Obama Administration will press to limit the tax benefits of munis. Would this explain the  recent rise in bond values I have seen? When does it make sense, if ever, to sell a muni before maturity to take advantage of these capital gains?

J.S., Pennsylvania

Is it a crime to own interest-paying municipal bonds from different states?

H.R.

The returns you referred to in your article, “Man Bites Dog, Almost,” can only be achieved by bond traders churning their portfolios. If you buy and hold munis, you will get about 5% to 6% tax free. Still a good deal, but not exactly manna from heaven. Please tell me if I have missed something.

J.T., California

I appreciate your article, “Man Bites Dog, Almost.” I have about $4 million already invested in muni bonds and another $1.5 million in cash that I have been afraid to invest in bonds. I have about $500,000 in stocks, which haven’t done much in the past few years. Should I wait for interest rates to go up? I am 58 and near retirement.

J.M., California

Can you please explain the bond return figures you quote glowingly in your commentary, “Man Bites Dog, Almost“? If you buy and hold a 4% bond to maturity, it returns 4%, etc. If I have to pay a premium for it, I realize even less. Am I missing something here in understanding my bond investments, or are you speaking in your article of people who trade bonds?

A.F., New Jersey