Municipal Bond Forum
Quality first
Q
Regarding your laddering article, you presumably don’t have a problem with “chasing yield,” assuming good credit quality. If the concern is quick Fed tightening, would you still go long now?
A
James A. Klotz responds:
I think we agree with your conclusion as long as “chasing yield” does not imply sacrificing credit quality.
As we said, interest rate forecasting is a dangerous game. There have been many occasions over the years that “Fed tightening” has led to lower long-term interest rates.
Tightening, by the way, often sends a signal to the markets that the Fed is being diligent in combating inflation and will slow the economy, causing long-term interest rates to decline.
We feel investors should buy bonds when investment funds are available. Timing interest rates is too difficult. No one rings a bell when it is time to buy.
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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.