Municipal Bond Forum

I just read your timely article, “What’s In Store For Municipal Bonds This Year” and noticed you mentioned that munis are currently a bargain. Over the last several years the AAA-muni to 10-year-Treasury ratio has ranged from the low 80s to over 100. It is currently in the low 80s. Wouldn’t that make munis, at least vs. Treasuries, expensive at this time?

L.C., California

I was glad to see your Bond Forum answer entitled, “Insured Puerto Rico Muni Bonds in Demand,” which confirmed my belief that these were worth holding. My question is, if the interest on a Puerto Rico bond is being paid by, say, Assured Guaranty Municipal but the bond is callable, is there any way on earth that bond can be called? I would think not, which would in essence also bring “call protection” to these bonds.

M.M., Tennessee

We moved from Florida to California two years ago. We own municipal bonds from Florida, New Jersey, New York and Pennsylvania. I am told we now have to declare $20,000 as income as non-California munis are not tax deductible. We are in our 80s and this will be devastating. Can this be true?

J., California

Is MBIA in good financial shape and are they able to withstand a complete default from Puerto Rico? I’d like to know before I buy bonds.

J.G., Florida

We’re waiting with bated breath for your reading of the Senate’s version of the tax overhaul bill passed last week. Did the Senate version eliminate or reduce the exemption for private activity bonds? Will existing PABs be grandfathered or will any new rule apply to them, too? Specifically, what kind of bonds are effected? When we buy bonds, what do we look for to determine if they’re PABs?

D.H., Virginia

I’m a California resident paying a 12% state tax. Do you think it makes sense for me to buy municipal bonds from other states?

J.M., California

What’s the upshot of President Trump’s “pledge” to wipe out Puerto Rico’s debt and how will this affect my Puerto Rico bonds? How far will the insurance on my Puerto Rico bonds carry me?

R.V., Massachusetts

If corporate tax rates were reduced to, say, 25%, do you think the municipal bond market would be OK in terms of demand?

K.S., Florida

After the Fed raised the benchmark lending rate by .25% last week, why are municipal bond rates off .15% across all maturities and credit ratings?

J.T., Florida

I have a laddered portfolio of California municipal bonds, many of which were purchased in 2007 at or around par. Most have coupon rates of 5.00% and are being redeemed this month. In order to reinvest in similar munis, I had to pay a 16% to 20% premium. In your article, “Summer Forecast: A Muni Redemption Flood, Supply Drought,” you said investors can often enhance their tax-free income when bonds are redeemed. With regard to these 2007 bonds, I don’t see how redemptions aren’t an issue or how reinvesting in similar bonds can enhance my tax-free income. In the decreasing-rate environment that has been in place for around 30 years, shouldn’t investors hope that older bonds are not redeemed?

L.C., California