Seeking Alpha

The municipal-bond revival

  • Municipal-bond prices have soared so far in 2014, compared to the same time one year ago. 2013 was the markets worst year in almost two decades, after registering losses nationwide - ranging from Detroit's municipal bankruptcy-protection filing to pension costs in Illinois.
  • The revival of the $3.7T municipal-bond market comes as bond buyers attempt to find higher investment returns amid dropping U.S. interest rates.
  • Investors have also poured $3.1B into municipal-bond mutual funds this year, compared with $2.9Bn over the same period in 2013.
  • Municipal bonds have returned 5.8% in 2014, reflecting interest payments and price appreciation.
  • Yields on municipal debt fell to 2.3% this past Wednesday, which was their lowest in almost a year. Yields fall when prices rise.
  • ETFs: MUB, HYD, BAB, PZA, MUNI, TFI, ITM, HYMB, MLN, CMF, SHM, BABZ, BABS, XMPT, PRB, SHYD, SUB, SMB, NYF, PZT, CXA, PWZ, PVI, SMMU, INY, MUAF, MUAD, VRD, MUAE, MUAG, MUAC, GMMB, FMB, RVNU, MUAH
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Comments (10)
  • june1234
    , contributor
    Comments (3278) | Send Message
     
    Indexes and bonds going up in tandem for 6 months, normal in tooth fairy land
    30 May 2014, 06:46 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (9822) | Send Message
     
    Yield is king.

     

    If it provides yield...its going to go up in value.

     

    Deflation is the law of the investment land at the moment.
    30 May 2014, 09:26 AM Reply Like
  • eternitus141
    , contributor
    Comments (321) | Send Message
     
    You can thank Mr. Obama for this one. The tax rate on regular way bonds is at a sky-high 43.4%. Part of this is a natural revaluation as this made munis 15% more attractive on a relative basis, part of this is declining interest rates.
    30 May 2014, 09:29 AM Reply Like
  • ARG1
    , contributor
    Comments (1303) | Send Message
     
    Also, muni bonds are being called, the amount of bonds offered is shrinking so supply and demand is supporting prices.
    13 Jun 2014, 02:47 AM Reply Like
  • notaexpert
    , contributor
    Comments (311) | Send Message
     
    YEP,

     

    I had 3 bonds called within the past 3 months.
    29 Jun, 08:22 PM Reply Like
  • Scooter-Pop
    , contributor
    Comments (3133) | Send Message
     
    Not,

     

    What muni bond CEFs do you own and are you buying any?
    30 Jun, 02:34 PM Reply Like
  • notaexpert
    , contributor
    Comments (311) | Send Message
     
    Hi Scooter,

     

    I am not buying Muni-CEFS at present, simply holding Muni-Bonds to maturity.

     

    I am researching EVN, MMU, VTN, VGM, and VKI at present and looking at a few blackrock funds.

     

    I am avoiding funds with PR holdings. I plan to start accumulating some Muni-CEFS soon based on amt, yield, holdings, and discount to NAV. I am looking for 7% or greater tax free yield trading at a minimum of 8% discount to NAV.

     

    Hope you are well, if you have any suggestions holler back at me.
    2 Jul, 06:44 AM Reply Like
  • Scooter-Pop
    , contributor
    Comments (3133) | Send Message
     
    2015 has been brutal for those of us Long Muni CEFs. I have increasing concern for Muni Bonds from those States with increasing unfunded liabilities. I think Texas has about 80 billion of debt hidden from the Budget.

     

    Puerto Rico is top of the concern list for analogous Greek reasons, living beyond your means while expecting someone else to provide the monetary subsidy.

     

    This type of Greek subsidy thrives in the USA as long as the Bonds are sold, thereby the subsidy. I try to avoid funds with top allocations in California, Illinois, New York and New Jersey.

     

    Portfolio Bond Issuance is at ever lower cupon yields. Leverage is great in an increasing cupon yield environment, somewhat bouying on the way down and to be avoided at the bottom. I believe we are bottoming.

     

    Bond Rating Agencies need to do a better job not being the last sound you hear when trouble is imminent.

     

    The upside begins when cupon yields rise to compete for purchasers. That may start when the Fed becomes truly independent of the Whitehouse (so never). Until then I am on hold, refusing to ladder into declining yields.
    2 Jul, 07:10 AM Reply Like
  • notaexpert
    , contributor
    Comments (311) | Send Message
     
    Hi Scooter,

     

    You are exactly right, I try to avoid PR, Chicago, and California holdings for sure. I do like Texas bonds though, mainly cities like Houston and Dallas. On my bonds I buy them and I hold to maturity and they are all a minimum of AA rated. I don't need the income but rather a safe place to put cash.

     

    One thing I can say is that I have never lost money on Muni-CEFS, I was down on many of them for years but I just held them and price came back where I made a profit when I sold PLUS years of tax free distributions.

     

    I am seeing a slight trend on Muni CEFS starting to recover which is why I am researching. I am beginning to think they hit bottom but of course that is until either the fed increases rates or bad news comes from the bond market. It is getting awful temping to buy with yields running around 7% and 8-14% discounts to NAV..... I wonder if the market has already priced in a interest rate hike?

     

    Might checkout PSF... Its not a muni but it looks interesting. I bought some the other day.
    2 Jul, 10:15 AM Reply Like
  • Scooter-Pop
    , contributor
    Comments (3133) | Send Message
     
    I did add to a few Muni CEFs today.
    2 Jul, 04:35 PM Reply Like
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