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| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| More |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Why investors shouldn’t break with muni bonds
Focus on high-quality issuers, broadly diversified funds and ETFs |
By Deborah Levine
NEW YORK (MarketWatch) — Serious budget issues facing many states and cities, while tough for taxpayers and unsettling for investors, are likely overstating the risks of owning municipal bonds in this time of crisis.
It comes down to picking the right types of investments in the huge and varied municipal-bond market, which ranges from single bonds issued by small school districts to mutual funds that invest in states with country-sized economies.
Larger issuers, especially those that can raise taxes, are often considered safer. Plus, headlines about bankrupt cities and forecasts of surging defaults have also created some value opportunities, according to some fund managers.
“There have been lots of stories about the fiscal stresses municipalities are facing, and they certainly are,” said Christopher Alwine, head of Vanguard’s Municipal Bond Group. But, he added, “the default risk is overstated in the marketplace.”
Investor panic
No question, many cities and school districts are hurting from falling property values, and states need to balance their budgets without federal aid. Accordingly, muni-bond investors are concerned that some issuers may not be able to pay their debt on time.
In the four weeks ended Jan. 5, net outflows from municipal-bond funds were more than $13 billion. Since the start of November, the funds have lost $22 billion, according to the Investment Company Institute.
As investors fled, the yield on the 30-year, triple-A rated municipal bond reached 5.01%, the first time that yield had topped 5% since January 2009.
“In some respects, municipals are experiencing even more pressure than what was experienced in the market during the last six weeks of last year,” wrote Bank of America Merrill Lynch municipal research strategist John Hallacy on Friday.
An index of muni bonds dropped 4.5% in the last three months of 2010, according to Bank of America Merrill Lynch. That cut the annual return for the sector to about 2.3%.
For some of the biggest muni exchange-traded funds, the end of 2010 was their worst quarter since inception.
The iShares S&P National AMT-Free Municipal Bond Fund ETF (MUB 96.26, -1.05, -1.08%) lost 6% in the last three months of 2010. It’s lost 3% this year.
The SPDR Barclays Capital Short-term Municipal Bond ETF (SHM 23.36, -0.27, -1.14%) fell 1.3% in the fourth quarter. It’s lost 2% this year.
The recent selloff is forcing even investors that believe in the sector’s long-term viability to change their plans.
For the complete article.
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| Stuff to look at |
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S&P Commentary and Newsletters: S&P
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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