Re: NY Municipal Bond Prices
- From: Abu Dufus <cripples.and.shutins@xxxxxxxxxxxxxxx>
- Date: Fri, 29 Feb 2008 20:45:14 +0000 (UTC)
It would seem at this time, if he doesn't need the money, it's best to
wait this thing out and not take a capital loss?
If they have enough stuff coming to maturity soon and a small enough
percentage of defaults they will reinvest in new munis and return really
attractive dividends. I don't expect a new AAA Ins 20 year muni to do less
than tax free 5.2%, which in the 28% bracket should slightly beat inflation.
The NAV is based on "averaged" pricing for the securities they hold, and
the bond market is much more representative of horse trading than stock
trading. Since they don't plan to liquidate their bonds any time soon I
wouldn't focus too much on the NAV, just on the default percentage in the
fund. Muni's define the phrase "thinly traded".
Holding muni's themselves is not a problem if
You need the interest, not the principal
Your interest rate is at least 75% of the prevailing and you are willing
to shrug your shoulders and not fret over the yield that "got away".
You don't need a capital loss to offset capital gains made in something
profitable,like the commodities market.
You have less appetite for risk than the stock market but more than low
yield treasuries. Good muni funds and good muni's are relatively safe, even
as the U.S. takes a seat in a row that is further back in the world balcony.
Risky funds (Opp's "Rochester National Municipals" come to mind) are for
those who accept a 7.5% default as reasonable given the incredibly high tax
free yield of the fund. I can not recommend them to anyone with heart or
mental problems since you have to be willing to passively ride the closed
end fund price all over the place with irrational up's and down's.
A good reference as to what "typical" bonds are trading at is at
www.investinginbonds.com .
Select "municipals" then select your state and issuer.
There are usually theee news articles also on the page, but if you follow
the "usual sources" (marketwatch, bloomberg, onlinewsj.com,etc)
the news is stale. However the trade data is not. WhatI am seeing this
morning is a "panic" price level in "bought from customer". The brokerage
margins also seem unusually high today, although I have not looked at
enough trades today to say that is true without reservation.
In any case, it looks like the precipitous drop in muni prices which we all
sensed was coming has arrived. Although the muni masters are showing a 1.5%
drop in AAA insured long dated muni's, it looks more like 3.5% from the
sample I am seeing.
.
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- Re: NY Municipal Bond Prices
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