Municipal Bond Forum

I read both the Wall Street Journal article and your response, “Just How Smart is the ‘Intelligent Investor’?” I think the WSJ article really was saying that some muni bonds and dealers state the “distribution yield” to their clients, in addition to the yield to worst and yield to maturity. Many clients probably don’t bother to understand what they mean and falsely interpret distribution yield as if it is a meaningful number. In my opinion, and hopefully yours, it is an irrelevant and meaningless number. I recognized that when I bought my first muni bond, but I am a highly analytical type. I would venture to say that most muni bond buyers are not so mathematically inclined. Probably “distribution yield” should never even be mentioned because the mere mention of it conveys the impression that it has some relevance. That was my takeaway from the WSJ article, and I agreed with that message because I’d already reached the same conclusion.

S.M., Pennsylvania

Your “Just How Smart is the ‘Intelligent Investor’?” article should be required reading for anyone who buys individual municipal bonds. Family members for whom I help manage some their assets, including significant holdings in municipal bonds, think of bonds as trading mechanisms, not holding securities.

J.B., Illinois

Do the worst case yields cited by your firm account for an adjustment of principal in the return? In a recent Wall Street Journal article, the columnist advised bond buyers to ask this very important question.

V.A., Nevada

A recent column in the Wall Street Journal said brokers overstate the yield on municipal bonds and that 4.00% returns on a bond are an illusion. On my bond purchases from FMSbonds, I always know the yield to maturity and yield to call. I have enjoyed purchasing many bonds from FMSbonds in 2015 that pay over 4.00% and, in a few cases over 5.00%. Can you address this please?

B.A., Indiana

So let’s say the Fed goes crazy and raises rates a whopping 1/4%, as you suggest in your article, “The Fed Didn’t Move. Cue the Conjecture.” What kind of impact will this translate to someone who owns a high-yield muni bond fund? If you had a liquid $50,000, what would you do with it, if you could only invest for six months?

M.G.

I read that Puerto Rico stopped setting aside money to pay the General Obligation interest payment in January 2016. Do you think this is indicative of their intent not to make the January 2016 payment?

K.H., Indiana

What are some of the scenarios we bondholders can now expect concerning the outcome of the Puerto Rico debt problem?

R.W., North Carolina

If Puerto Rico gets approval to file Chapter 9 – and does – will this be good or bad for the bondholders?

D.H., New Jersey

In “Puerto Rico: Unable or Unwilling?” you mentioned COFINA bonds, which I own. Payment is due Aug. 1 and I noted the revenue for those bonds was fully collected by year-end 2014. Can we expect timely payment?

C.G., New Hampshire

Lots of “ifs” in your article “Puerto Rico: Unable or Unwilling?”  Existing bonds insured by AGC and maybe National might pay off if we’re lucky. Payment for COFINA bonds are due Aug. 1. Puerto Rico’s debt is “CCC-” on its own. There are better opportunities out there, even Chicago!

J.M., Florida