Municipal Bond Forum
On The Reality Behind the Bond Market Shakeup
Q
I’m having trouble following your logic. Would you make clearer what is happening to the markets?
How do you determine which bonds that are at depressed levels? It seems to me that it would take a team of experts led by Bill Gross to determine the truth from the trash.
A
James A. Klotz responds:
In a nutshell, there are a number of well-secured bonds that have been dropping in price due to the “herd mentality” that often accompanies panicky markets.
Some of these securities are not even remotely related to the sub-prime mortgage problem and are secured by independent revenue sources.
When markets tumble and institutional investors need to raise cash, those who can’t find a market for what they would like to sell, sell what they can.
In the current case, it happens to be some good quality, investment-grade tax-free bonds.
One example is tobacco securitization bonds. Because a number of institutions have been forced to liquidate these securities to cover shortfalls in their loan portfolios, these investment-grade bonds are now trading at yields that represent outstanding value. For more information or specific offerings, please contact us.
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This report is produced solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This report is based on information obtained from sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed.