Head Scratcher

While I am not an expert on the municipal bond market I thought that the Illinois decision to raise taxes should have been positive for the muni market. Instead municipal bonds are hitting new lows. Fiscal and municipal imbalances will not matter until one day they do. I believe the situation is worth monitoring.

1 comment:

revelo said...

Munis are owned by older individuals, who are very slow to react to the news, tend to move in herds, and tend to cause an overshoot/undershoot of prices. I'm looking forwards to switching from intermediate-term corporates to intermediate-term munis if and when there is indication of a full-blown panic. We're not there yet.

I won't put all my money into long-term bonds of any sort because of the ever-present though remote possibility of another world war or worldwide natural disaster (meteorite strike) which might bring on sustained high inflation. However, if the muni panic coincides with a stock-market decline, then I might consider mixing and matching long-term munis with stocks bought at a discount.