| 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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| 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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Municipal bonds can have place in your portfolio |
MONEY MATTERS - July 5, 2010 - by By JOHN SCHEC
KIndividuals are the single largest group of owners in today's municipal bond marketplace, according to the Federal Reserve Board Flow of Funds Account, March 2010. Why? Because municipal bonds are unique securities, generally offering investors features such as tax-exempt, predictable income and high credit quality on many issues.
Municipal bonds are tax-exempt, fixed income securities that represent the debt obligations of municipal entities (states, cities, counties, etc.) seeking to raise money to fund projects for the public good, such as building schools, highways and hospitals. The issuer promises to repay principal in full at the bond's maturity, and to pay semiannual interest income. While interest on municipal bonds is generally exempt from federal income tax, some bonds may be subject to the alternative minimum tax (AMT).
Typically, state tax-exemption applies if securities are issued within one's state of residence and, if applicable, local tax-exemption applies if securities are issued within one's city of residence.
Is your Federal Income Tax Bracket 25 percent or Higher?
One of the most compelling reasons to own municipal bonds is that interest income is generally exempt from regular federal income tax. Under most state laws, "home-state" municipal bonds' interest income is also exempt from state and local taxes. As a result, municipal bonds may generate higher net (after-tax) yields than taxable bonds of similar quality and maturity.
Your federal tax bracket plays an important role in determining whether a taxable or tax-exempt security is the better choice for you. As a general guideline, the higher your tax bracket, the more likely you are to potentially benefit from owning municipal bonds. An investor in the 33 percent federal income tax bracket would have to earn a 6.72 percent yield from a comparable fully taxable bond to match a 4.50 percent yield from a tax-exempt municipal bond.
Nonetheless, when choosing any fixed-income security, you need to do more than just compare yields to find the bond that is most appropriate for you; an assessment of risk and return is also important:
Consider the Impact of Interest Rates
All fixed income securities are susceptible to interest rates fluctuations; generally, if interest rates fall, bond prices rise and inversely, if interest rates rise, bond prices fall. Because bonds are typically issued with prevailing market yields, rising market interest rates cause new issues to have higher yields than existing bonds, forcing down prices on existing bonds.
Generally, longer term bonds are more sensitive to interest rate changes, and the more likely their value is to fluctuate. However, longer-term bonds generally have higher yields, thus compensating for the time principal is exposed to interest rate fluctuations. Conversely, bonds with short-term maturities (up to a year) normally experience relatively minimal changes in price as interest rates fluctuate, but also typically provide lower yields.
Another point to consider: If you hold your bonds to maturity, your principal will be returned in full, yet, if you sell your bonds prior to maturity, the price you receive may be more or less than your original purchase price.
For the complete article...
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