Municipal Bond Forum

Are there any similarities between Detroit’s situation and the “Whoops” (WPPSS) muni bonds from the ‘70’s?

M.G., Florida

Though there have been numerous articles on how the new government of Puerto Rico has made great strides in fixing its pension problem and operating budget, the ratings agencies refuse to increase their credit rating and seem to focus on the negative. Where do you think the bottom is on Puerto Rico bonds and how will their electric bond sale affect the market?

S.S., New York

I own Detroit General Obligation water bonds insured by National. My financial adviser told me that as the city’s problems wind through the courts, Detroit won’t pay timely interest and only my principal of $40,000 will continue to be insured by National. The price of these bonds stands at 86.999 as of July 22, 2013, and continues to go down every day. Your thoughts?

E.M., Michigan

My husband and I have quite a few Detroit General Obligation bonds back by AMBAC and other insurers. Aren’t the insurers responsible for paying us if the city defaults on these G.O. bond payments?

L.J., Colorado

Can you explain what insurance is and how it works? What is the risk? Is a bond with insurance as safe as a CD with FDIC insurance?

D.R., New York

I am managing the portfolio of my mother’s estate and her investment manager has put a significant amount of her portfolio into mostly California municipal “AAA” or “AA” bonds with a range of 10- to 30-year maturities over the last year. Should I be worried that these bonds are going to deplete the estate’s assets should she pass away?

C.M.

We received an e-mail warning bondholders of higher interest rates and strategies to make a lot of money quickly. More than half of our retirement portfolio is with FMSbonds. We entrusted our funds with you in the hope that we do not have to worry about the future, regardless of interest rates, etc.

H.D., Minnesota

I hold both muni funds (long term) and a large portfolio of individual munis. Now that my paper gains in the funds have evaporated, I question the wisdom of bond funds vs. individual bonds. I see the drop in prices as good news, but in the bond funds I have no “par value” to rely upon, and I am at the mercy of “yield seekers.” Is my automatic reinvestment of interest in the muni fund a sound “cost averaging” strategy for a buy-and-hold investor?

C.K.