Puerto Rico Municipal Bond Holders – You’ve Been Warned.March 8th, 2012 by David Waring
Tweet and Article by @cate_long
Puerto Rico is America’s Greece – Our Take: This one is worth a read all the way through but here are some of the more interesting points: Puerto Rico’s muni bonds are tax exempt in all 50 states, which creates lots of demand for their bonds. Debt load is 89% of GDP and finances are deteriorating. Bonds currently rated one notch above junk, if they get a downgrade their borrowing costs skyrocket. People think if they get into trouble the US Government will bail them out. Cate who is a top expert on municipal bonds isn’t so sure.
Tweet and Article by @TaylorRiggs_BB
bid side has crashed in #muniland - Our Take: There has been a lot of new municipal bonds issues recently and it seems that the supply has started to outpace demand a little bit recently. When this happens the borrowing costs of municipalities increase in the form of the higher yields they have to pay on new municipal bonds they issue. This can also be a bad thing for existing municipal bondholders as if they want to sell their bonds before maturity the higher yields go the lower price goes. Taylor gives some additional stats from today’s trading that are worth a read.
Tweets by @Munisrgood
Milk goes bad. You can tell by the smell or sometimes when you pour it. The muni market currently smells and is about to have chunks. Our Take: @munisrgood confirms @TaylorRiggs_BB’s point that today was not a good day in the municipal bond market. As he points out in later tweets he is speaking from a trader’s perspective and has “great faith in the muni market from an investor’s viewpoint. Buy quality and the right maturity for your needs and you’ll be fine“. So basically today was for the most part a non event for the long term retail investor.
Price War Looms Amount Big ETF Providers - Our Take: While there are some exceptions, ETF’s for the most part have been an awesome thing for investors. ETFs have lowered fees substantially in a lot of cases and as they become even more popular fees will go even lower. We will be doing more on Bond ETFs here at LearnBonds soon.
Cool Chart Found on @seekingalpha
10 Year Treasury Since 1890 - Article and chart from Contributor Simon Moore.
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