Municipal Bond Forum
Treasuries yielding little
Q
I own 4 million in short-term treasuries that are not paying any interest to speak of. Is this a good time to buy California munis or should I wait until interest rates rise?
A
James A. Klotz responds:
We are not convinced that interest rates will be going up, especially on municipal bonds, which are trading at historically high yields when compared to taxable Treasury bonds.
If your investment funds are earning less than 1.00% in Treasury bills for any length of time, regardless of how high rates go (if they do rise), it will be almost impossible to make up the income you could be earning on a 5.50% or 6.00% municipal bond.
You may want to consider wading into the market by investing a portion of your investable dollars in high quality California municipal bonds. There is no need to commit all of your funds to the municipal market at once.
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The responses provided in this forum are meant to address specific questions posed by investors about their municipal bonds and to provide market insight for our general audience. Please note, your investments, objectives, results and experience may differ significantly. Our answers and any potential strategies discussed should not be construed as a solicitation to buy nor sell any security or investment product. All investing entails risk.