Municipal Bond Forum
What is ‘good’ credit quality in a muni bond?
Q
You write that muni bond investors should first be satisfied with the credit quality of the bonds they’re considering purchasing and then focus on maximizing their tax-free income by purchasing long-term bonds. What do you consider good credit quality in a muni bond?
A
James A. Klotz responds:
That’s a good question. It’s impossible to make a general statement about credit quality. Although rating agencies can provide reasonable guidelines, they sometimes fall “behind the curve” when it comes to changes in the status of a particular credit.
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