Municipal Bond Forum

Were Jefferson County bonds insured? If they were, would the principal be paid? I only invest in insured bonds.

T.R., New York

Would you please tell me the difference between “escrowed to maturity” bonds and “fully-defeased” bonds”?

D.D., California

I have been hearing for several years that municipalities had to increase interest rates in order to attract buyers. Is that correct?

V.C., California

I’ve read that Los Angeles will file for bankruptcy, but I can’t find anything to confirm this. I do know that the city’s deficit is in the hundreds of millions. So far, my bonds tied to Los Angeles are holding up in value. Most are revenue bonds. What would happen to the revenue bonds, such as the LA DWP, should the L.A. general fund become insolvent?

S.W., California

I have a question about the way rating agencies work. Certain municipalities across the nation and in California are rated “AAA,” while the U.S. Treasury is rated only “A.” This discordance is silly. What are your thoughts?

J.S., California

What distinction exists between escrowed and pre-refunded municipal bonds? Also, does it only make sense to invest in these types of bonds.

N.M.

I enjoyed your piece, “The Mets, the Pundits and the ‘Old Perfessor,’” about the prevalence of bad advice offered by so many so-called experts. I have found that some brokers recommend new issue long-term bonds hot off the press with miniscule yields. Your firm offers previously issued bonds trading with significantly higher yields to call. Maybe a follow-up to your article could be entitled, “Avoiding the Foul Tip!”

I.S., New York

If dollars from the sale of bonds with looming call dates are used to purchase cheaper, longer- term bonds, would this lengthen the average maturity or call dates in my portfolio? If so, would this cause an increase in risk due to rising interest rates that seem predictable over the next few years? For example, if I replace many of my shorter-term bonds with longer-term ones and interest rates rise, I might be sacrificing the opportunity to buy bonds later at higher rates. As you can probably tell, my muni bonds are currently arrayed in a “ladder.”

D.T.

Could you describe the importance of insured muni bonds? What exactly do they insure? Also, just how dangerous do you consider leveraged funds to be? Is the risk with these funds worth the extra high yields?

M.F., California

Why is the availability of bonds so restricted? What will it take to restore municipal issuers’ confidence?

S.O., California