Is it a crime to own interest-paying municipal bonds from different states?
H.R.
State where you file dictates whether you pay taxes
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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.
With values up, is it a good time to sell?
Your article, “Off the Table, or Not“, discusses whether the Obama Administration will press to limit the tax benefits of munis. Would this explain the recent rise in bond values I have seen? When does it make sense, if ever, to sell a muni before maturity to take advantage of these capital gains?
J.S., Pennsylvania
Why are there fewer new issues?
I recently noticed that the tax-free inventory being offered for sale by FMSbonds seems to have shrunk. I also noticed that most bonds are out to longer maturity dates for any decent returns. Many of them also seem to be carrying a heavy premium for a decently priced issue. If we intend to sell some decent holdings, it would seem that it should also work in the opposite manner. To what do you attribute the apparent shortage of tax-free new issues?
W.P., Florida
Supply and demand dictate prices
If the exemption on new municipal bond issues were eliminated, what would happen to the price of existing munis?
S.T., Texas
Soothsaying and the lost decade
I read your article, “Time Flew, But Interest Rates Didn’t.” Six months later, do you still feel the same way? Interest rates have fallen and 5% is not available, not even on long-term (20-years-plus) bonds that are “AA” or better?
G.C., California
Wondering whether to wait
I appreciate your article, “Man Bites Dog, Almost.” I have about $4 million already invested in muni bonds and another $1.5 million in cash that I have been afraid to invest in bonds. I have about $500,000 in stocks, which haven’t done much in the past few years. Should I wait for interest rates to go up? I am 58 and near retirement.
J.M., California
Not manna from heaven, but still a good deal
The returns you referred to in your article, “Man Bites Dog, Almost,” can only be achieved by bond traders churning their portfolios. If you buy and hold munis, you will get about 5% to 6% tax free. Still a good deal, but not exactly manna from heaven. Please tell me if I have missed something.
J.T., California
Upending conventional wisdom
Can you please explain the bond return figures you quote glowingly in your commentary, “Man Bites Dog, Almost“? If you buy and hold a 4% bond to maturity, it returns 4%, etc. If I have to pay a premium for it, I realize even less. Am I missing something here in understanding my bond investments, or are you speaking in your article of people who trade bonds?
A.F., New Jersey
AMT basics
Can you furnish basic information on the alternative minimum tax. How is it determined? What is its ultimate impact on an investor’s holdings in municipal bonds?
‘Total return’
In your article, “A Disappointing Year for Doomsayers,” you say, “Further confounding the self-anointed seers, municipal bonds have returned 10.10% year-to-date, even outstripping the broad U.S. Treasury index, which delivered a robust 9.95%.” Don’t you mean that the increase in return was 10.10% for munis?
A.C., New Mexico
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