Bogleheads Home Bogleheads
Investing Advice Inspired by Jack Bogle
 
  WikiWiki    FAQFAQ    SearchSearch   MemberlistMemberlist   UsergroupsUsergroups   RegisterRegister 
 ProfileProfile   Log in to check your private messagesLog in to check your private messages   Log inLog in 

Muni bonds risky now?

 
Post new topic   Reply to topic    Bogleheads Forum Index -> Investing - Help with Personal Investments
View previous topic :: View next topic  
Author Message
msi



Joined: 18 Feb 2008
Posts: 159
PostPosted: Mon Feb 18, 2008 3:51 pm    Post subject: Muni bonds risky now? Reply with quote
Hi,

I wanted to buy Vanguard's NJ Muni Fund or Fidelity's, but I'm concerned with the failed muni bond auctions and Ambac/MBIA collapsing that this is a bad idea for bond allocation.

I read some threads about this here and someone was saying that these bonds have 1/10 the default rate of their equivalent corporate bonds, which was encouraging.

Any thoughts? Are you guys pulling out of muni bonds?

Thanks.
Back to top
View user's profile Send private message
Valuethinker



Joined: 11 May 2007
Posts: 13357
PostPosted: Mon Feb 18, 2008 6:18 pm    Post subject: Re: Muni bonds risky now? Reply with quote
msi wrote:
Hi,

I wanted to buy Vanguard's NJ Muni Fund or Fidelity's, but I'm concerned with the failed muni bond auctions and Ambac/MBIA collapsing that this is a bad idea for bond allocation.

I read some threads about this here and someone was saying that these bonds have 1/10 the default rate of their equivalent corporate bonds, which was encouraging.

Any thoughts? Are you guys pulling out of muni bonds?

Thanks.


You should probably dig out the Moody's and S&P general commentary on the State of New Jersey's fiscal position.

What is in those funds? Are they local government bonds which are of the higher risk categories, if you strip away the muni insurance? eg healthcare bonds and economic development bonds (I think those were 2 that Larry Swedroe mentioned as having relatively high defaults).

In summary, what is going on is Munis are going to be rated at their 'natural' rating, not their 'insured' rating.

The good news is that, as you say, historically muni defaults are much lower than corporate defaults. That probably presents a buying opportunity.

However one would have to look in more detail and probably not put all your fixed income eggs in the NJ basket.
Back to top
View user's profile Send private message
Display posts from previous:   
Post new topic   Reply to topic    Bogleheads Forum Index -> Investing - Help with Personal Investments All times are GMT - 4 Hours
Page 1 of 1

 
Jump to:  
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum


Powered by phpBB © 2001, 2005 phpBB Group