This post is part of a series of posts asking Is the Muni Bond Crisis Overblown?
On the other hand, Robert Lenzner says that muni bond defaults will be rare.
Investors will remain cautious and we could see continued outflow out of muni bond funds.
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Regaining its reputation as a legitimate muni bond insurer will require more work, however.
They were told, It's a muni bond, it's safe, they're going to help old people like you.
AAA-rated muni bond maturing in five years is yielding around 1.8% now, which is about the same as five-year Treasury bonds.
He had an interesting idea for what might help the muni bond market.
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Therefore, in yet another subprime redux, Wall Street has found a way to make the muni bond problem even worse.
In the General Obligation muni bond space, stick with states whose present budgets and unfunded pension liabilities appear somewhat manageable.
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There are some muni bond basics that are being overlooked, Nicolas says.
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The muni bond insurance market has decreased 98% since 2007 and the old AAA guaranteed muni bond has become a virtually extinct species.
Just as the news media focused on the bond vigilantes taking down Ireland, the retail muni bond vigilantes took down the muni market.
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Another area muni bond fund investors should look for are how much in Florida, Arizona, California and Nevada community development bonds their fund owns.
Directly and indirectly, individuals control two-thirds of the market, which means that muni bond prices move in what amounts to a retail echo chamber.
Unlike corporate bonds or U.S. Treasuries, muni bond interest is often federal tax-free and exempt from state income tax of the state they are issued.
Shah Gilani believes that muni bond default concerns are real.
Muni bond defaults have been below average this year and money value at muni bond defaults has been below average, both in number and in money.
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In December, when chatter heated up again about reducing the tax benefit of munis, there was a large move to the downside in muni bond ETFs.
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As of Thursday, a 5 year AAA corporate bond has an interest rate of 1.21% and a 5 year AAA muni bond has an interest rate of 0.93%.
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These previous attempts to go after the muni bond tax-exemption so far have not paid off, and muni bond investors have been able to breathe a sigh of relief.
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Veteran muni bond manager Barnet Sherman of Braintree Capital Partners says that an even better buy exists in the recently issued New Jersey Educational Facilities Authority Revenue Refunding Bonds due in 2032.
Many investors turn to municipal bonds, but before you do, read Richard Lehmann's "The Muni Bond Safety Mirage, " in which he points out that now is not a great time to be buying munis.
Just when concerns about the muni market were easing up following the fiscal cliff debates, muni bond investors now have a new worry: Several states may lower their state income taxes or eliminate them altogether .
While much was recently said about the future of municipal bonds, investors were finally able to take a breather following the fiscal cliff negotiations and talks about whether to tax muni bond interest or not.
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New clients in particular are easily swayed by the argument that muni bond default rates have been historically low, so they are a safe place to park your money until the economy fully recovers, and earn a decent return.
The ill-advised Jefferson County and Harrisburg projects are specific cases of mismanagement that are not tied systemic risk and should have no bearing on the health of, for example, a muni bond-financed turnpike in New Jersey or a hospital in Virginia.
"We expect economic slowing and belt-tightening, but we don't see this falloff as being as precipitous as it was in 2001, " says Robert Kurtter, a managing director at Moody's (nyse: MCO - news - people ) muni bond rating service.
If you're in the danger zone, try to limit deductions that aren't allowed in AMT--for example, unreimbursed employee business expenses. (Ask for a bigger expense account instead of a raise.) And pick your muni bond funds carefully: Certain muni interest is taxed in the AMT.
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Exchange-traded funds (ETFs) with long technical names often use catchy or easy-to-remember symbols in order to bolster their marketability as well as indicate their portfolios. (NYSE: MUNI) is the ticker for Pimco Intermediate Muni Bond Strategy ETF which invests in municipal bonds, while (NYSE: CORN) represents Teucrium Corn Fund ETF that tracks the price of corn.
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