Municipal Bond Forum

In your article, “A Disappointing Year for Doomsayers,” you say, “Further confounding the self-anointed seers, municipal bonds have returned 10.10% year-to-date, even outstripping the broad U.S. Treasury index, which delivered a robust 9.95%.” Don’t you mean that the increase in return was 10.10% for munis?

A.C., New Mexico

I own some Jefferson County bonds that are insured by Ambac. They last traded around mid-November at about 88 to 90. I have no idea if they will make their next interest payment in February, or if they will be redeemed at par in 2015. I am confused how the bankruptcy affects my bonds. Can you give me any info or guidance?

W.L., Florida

Of concern is the Obama Administration’s proposal to limit the tax advantage of owning municipals only to those individuals in the lowest income tax brackets. If such a proposal becomes law, it would, most assuredly, adversely impact the municipal market in general. Has FMS expressed a position on this significant matter?

N.M.

What do you think about muni managed funds like Blackrock’s MYD? It currently yields around 7.5% tax free, and 38% of the money they use is leveraged at these very low current interest rates. Yes, there is a management fee of over 1%, but they still throw off a net monthly income of over 7.5%. P.S. I’m one of your customers!

J.M., Florida

What makes a high quality bond? How do you search for them? How can you trust anyone in the financial markets these days?

A.R., California

I welcomed your article about misconceptions in the muni market. As a muni investor, I’m concerned that the government will find ways to change the game and beleaguered states will default or look at Chapter 9. I still invest in high quality muni bonds and usually include bonds with insurance, if possible (no guarantees there either!). But I don’t sleep well and remain concerned as to the future of these investments and our ability to work out our challenges without making bondholders look like evil people stealing money from “Joe the plumber.”

D.W., Florida

Happy to buy and hold I buy and hold, go out at long as I can on callable dates and buy at least 5% yields and insured bonds. At first, I laddered to generate monthly income, but did well on the rates. Now that I have good monthly income, I just go for insured bonds with the best rates regardless of the date due on interest payment. Sound OK?

G.P., Oklahoma

What effect, if any, will the municipal bankruptcy of Jefferson County, Alabama, have on its bonds?

B.G., California