What is your opinion regarding the safety of the city of Detroit’s general obligation, water and sewer munis?
W.L Michigan
Detroit’s finances
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Municipal Bond Forum
FMSbonds, Inc.’s Municipal Bond Forum is an exclusive opportunity for investors to submit questions and comments on the bond market or to respond to one of our articles.
To participate, just send us an e-mail. Be sure to include your name or initials and your state of residence. Posted e-mails may be edited for length and clarity. If you prefer a private response, please note that in your e-mail. Responses are provided by James A. Klotz, president and co-founder of FMSbonds, Inc., a municipal bond specialist for more than 35 years, and other members of the firm as noted.
Postings are listed by date. If you have any questions, please call us at 1-800-FMS-BOND (1-800-367-2663) or e-mail us.
Best time to sell?
My muni bond portfolio pays out almost 5% annually and earns the equivalent of almost 7.5% in taxable income with little risk to my principal. Let’s say I have a bond with a face value at maturity of $50,000. The cost basis is $50,685, the current yield is 4.58%, the current value is $58,700, the estimated annual income is $2,688 and the “unrealized gain” is $8,015. The bond matures on 1/1/21. How do I determine the optimum time to sell these bonds? The unrealized gain will undoubtedly decline as I get closer to maturity. Also, if a bond matures on, say, 1/1/21, but is callable on 1/1/19, what does that mean?
P.P., Arizona
Tobacco bonds for speculative investors
Why does your firm continue to sell tobacco bonds, which you expect will go belly up?
G.R., Florida
Numbers in Master Settlement Agreement hard to find
I own approximately $2.2 million of New York and New Jersey tobacco bonds. I am told those states did not accept the 54% tobacco bond settlement (“More Concern Over Tobacco Bonds“). I’ve had difficulty finding out how much is being held in escrow for each state and the total amount paid each year.
G.B.
States and tobacco bonds
I have been told that it is more likely the tobacco bonds will go into technical default than outright default. Since the payments go on for perpetuity, if revenue is insufficient to make interest payments (or principal repayment), then bonds maturing in 2040 might not be repaid until several years later, but they will eventually be repaid. Also, why aren’t states obligated to buy back some of the bonds? If revenue is less than they need to pay the interest, it means they issued too many bonds.
I.F., New Jersey
Where opportunity is created
I agree with your article (“Don’t be Negative“): Don’t wait. But what do we invest in – low coupons, big premiums and no returns? Oh, seer, what is the answer!
S.M., Florida
Munis best value in fixed-income market despite threat
As you mention in your article, “Munis Spared from ‘Fiscal Cliff’ Deal,” the tax exemption for munis was left intact. I do think, though, that we will eventually see a compromise somewhere between 28% and unlimited. The possibility gives me more to think about when trying to decide on future income sources.
E.R., Texas
Uncovering muni values after Hurricane Sandy
I noticed some Atlantic City bonds you are offering, but I’m not interested in any bonds connected with New Jersey shore communities. Please keep me posted with other offerings.
R.C., New Jersey
Hold Puerto Rico bond?
I own Puerto Rico bonds and they are down. Should I continue to hold them for the long run or trade them for, say, Connecticut bonds? What are their chances of default?
L.S., Connecticut
Big rise in rates is unlikely anytime soon
What are your thoughts on rates going up and the impact on long munis?
J.C., California
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