Municipal Bond Forum
Most munis backed by AAA-rated insurers are solid
Q
I agree with you on your analysis of Ambac’s fall. The best I see is that the bonds they insured were actually pretty good, so they should be OK. It was their mortgage business that killed them. Greed.
A
James A. Klotz responds:
Contrary to their practices in the mortgage market, the former “AAA”-rated bond insurers rarely provided insurance to municipal issuers with risky underlying credits. In other words, most of the municipal bonds they insured didn’t really need it.
As we have previously mentioned, in the current economic climate, it has never been more important for investors to scrutinize the bonds they purchase. As it turns out, because of the past vetting practices of the once formidable bond insurers, formerly “AAA”-rated bonds with good underlying credit are a good place to start.
Start here.
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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.