What are your thoughts on rates going up and the impact on long munis?
J.C., California
Big rise in rates is unlikely anytime soon
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Municipal Bond Forum
FMSbonds, Inc.’s Municipal Bond Forum is an exclusive opportunity for investors to submit questions and comments on the bond market or to respond to one of our articles.
To participate, just send us an e-mail. Be sure to include your name or initials and your state of residence. Posted e-mails may be edited for length and clarity. If you prefer a private response, please note that in your e-mail. Responses are provided by James A. Klotz, president and co-founder of FMSbonds, Inc., a municipal bond specialist for more than 35 years, and other members of the firm as noted.
Postings are listed by date. If you have any questions, please call us at 1-800-367-2663 or e-mail us.
Medicare tax
Does the 3.8% surcharge for investment income, which began Jan. 1, 2013, and will be used to help pay for Obamacare, also apply to tax-free muni bond income?
T.D., Florida
Munis and the community at large
Regarding your article, “Munis Spared from ‘Fiscal Cliff’ Deal“: You know, sometimes it pays to not gloat and leave gift horses unexamined! You are writing to the choir and the unevenly blessed and perhaps not deserving of the largesse we enjoy. Maybe if you spoke more of “put back” or “share,” the backlash won’t be as harsh as it could or should be.
N.R., Texas
Munis don’t strictly track Treasuries
Are values of municipal bonds effected to the same extent that Treasury bonds are affected by an increase in interest rate?
J.R., Florida
How some tobacco bonds call upon California’s enhancement
In your article, “MSA Clause Impacts State Tobacco Payments“, regarding Golden State Tobacco Securitization Corp. Series 2005 bonds, you state, “These bonds, however, are also backed by an appropriation pledge of the state of California.” Could you elaborate?
M.W.
BABs not likely to be called
It seems that most of the Build America Bonds (BABs) issued during 2009-2010 had healthy coupons and sold well above par. As a result, their “yields-to-call” were much less than their “yields-to-maturity.” In your opinion, what is the likelihood that BABs will be called (and their yields decreased), if the only reason is to refund debt at a lower interest rate? I’m thinking it’s not likely since interest rates can’t realistically go much lower and the existing 35% federal interest subsidy would not be recovered in any refunding. Or am I off base?
M.M., Tennessee
Divining the intent of Congress
If existing tax-free municipal bonds eventually become taxable by the actions of Congress, would bondholders have legal recourse?
G.W., Michigan
Essential nature of munis recognized by many
Based on your recent article, “A Lifeline After Sandy” and efforts in Congress to change or abolish the muni bond tax exemption, doesn’t it make sense for you to start a petition or letter to Congress signed by all of your muni bond clients? More than 50% of bond investors make less than $200,000 a year and any change will drastically hurt many retirees living off the income.
J.C., California
The lone voice
Why does a CNBC analyst say municipal bonds are bad investments and should be avoided? I hold many munis.
R.D., Vermont
Better late than never
I just read an article on Vanguard’s Web site that discussed the “non crisis” in the muni market. It occurred to me that you wrote the same thing more than 1 ½ years ago in your article, “A Funny Thing Happened While the Pundits Were Screaming“. I bet this guy makes the big bucks for his expertise!
J.S., Pennsylvania
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