Bogleheads

[aryanu]

Please pardon my ignorance on this topic.

As per Mad Money on CNBC today (http://www.cnbc.com/id/23391535)

They are saying this - " Cramer agreed with bond guru Bill Gross, who said that now is the best time in decades to buy municipal bonds"

Can anyone please explain why now is the best time to buy municipal bonds? And which VG funds are recommended for the same.

Thanks for your replies in advance.

-Aryanu

[indexfundfan]

Because muni's are now yielding more in nominal terms than treasury bonds, of the same duration.

Example:

VG Intermediate term tax exempt, duration 5.2 years, yield is 3.44%
VG Intermediate term treasury (taxable), duration 5.1 years, yield is 2.95%

As you can see, normally tax exempt funds should yield less, but now it is yielding more than taxable treasuries. This is not even accounting for the fact that the yield is not taxable for tax exempt funds.

Obviously tax exempt funds have higher credit risk than treasuries. Also, VG's intermediate term tax exempt fund has been falling for the past few days ... not sure when will it stop falling, preventing people from jumping in.
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[Ariel]

Move out just 1.4 years further in duration for the muni fund and yield rises to 3.91%. As I recall Larry Swedroe has said 0.25% in a decent increment for 1 year duration on taxable, and even less should suffice for tax-free munis.

https://personal.vanguard.com/....IntExt=INT
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Do what you will, the capital is at hazard ... - Justice Samuel Putnam (1830), as quoted by John Bogle (1994)

[astroturf]

For those who believe that the markets are efficient, then the municipal bond market is not the one to give as an example. Look at this chart:

http://finance.yahoo.com/chart....=undefined

VILPX is Insured Long Term Tax Exempt; VWLTX is Long Term Tax Exempt; VITFX is Intermediate Term Treasuries (duration matches more closely the other 2 than LT Treasuries).


Muni bonds are getting dumped big time, otherwise you wouldn't see the divergence between prices in treasuries and muni bonds as shown in the chart. It happened in August, November and since January. What's happening right now is a blood bath, but most likely a buying opportunity as the markets settle down.

[indexfundfan]

Just read this interesting post on M*. Because of muni ARS auction failures,

[Coyote22]

Indexfundman I hope you are right. I have some of my short-term liquid assets parked in VMLUX and it is getting killed.

[larryswedroe]

It is DFA's rule that 20bp per annum they like to see to extend
For munis obviously less needed,

[larryswedroe]

btw-another reason to buy munis (Edited for political content). That should result in munis trading at lower percentage of treasuries

[Paladin]

[larryswedroe]

Dont know why Vanguard's funds are down. Yields are up from month ago, but not much. And down from six months ago, quite a bit.
Perhaps they bought lots of bonds with poor underlying credits that were enhanced by insurance? No idea, just guessing.

[grok87]

[Dale_G]

All muni funds are down, there is nothing special going on at Vanguard.

During the August swoon, hedge funds and institutions allegedly dumped muni's for liquidity purposes because the couldn't sell their real junk at any price. We may be seeing some more of the same.

On January 2nd I booked a tax loss on Vanguard's Hi Yield Muni and exchanged into Vanguard's FL LT Muni. Depending on how Vanguard counts 60 days, I will be exchanging the FL Muni to Hi Yield to book another tax loss on March 2nd or 3rd.

I'll also add a little more dough.

If I were a speculator I would be going long additional muni's and shorting treasuries.

This too shall pass.

Dale
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first we crawl, then we walk, then we run, later we use any available transportation

[sscritic]

Vallejo California is about to declare bankruptcy. One municipal bankruptcy in California causes the sheep to sell California municipal bonds. Other sheep sell bonds from other states in reaction.

An efficient market can still be ruled by fear. The price of municipal bonds incorporates all the available information and fear.

[matt]

Larry Swedroe wrote:

[Ariel]

Dale -- Watch out on those muni fund trades. You need 6 months (not 60 days) for muni funds, otherwise you lose tax exemption on interest earned. I forget the complicated details, but there have been other threads about that here. Just a "heads up" to check things out more carefully!
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Do what you will, the capital is at hazard ... - Justice Samuel Putnam (1830), as quoted by John Bogle (1994)

[Ariel]

[duhmel1]

[Ariel]

Here's a link. Thanks he says with some irony

http://www.kron.com/Global/story.asp?S=7931251
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Do what you will, the capital is at hazard ... - Justice Samuel Putnam (1830), as quoted by John Bogle (1994)

[duhmel1]

http://cbs5.com/local/Vallejo.....65381.html

[Dale_G]

ariel, the first tax loss sale was long term and no dividends were reinvested. It won't matter much on the second sale if the dividends are taxable.

Dale
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first we crawl, then we walk, then we run, later we use any available transportation

[Ariel]

[bobbyrx]

I have a considerable amount of V. Tax-exempt Admiral (VWIUX). Today it hit a one-year low. Could this be an opportunity to add to this position? What are the downside risks? Thanks for all opinions.

[Dale_G]

bobbyrx, there is always downside risk. City halls, police stations, hospitals and toll road authorities could all just send their keys to the bank. If they do so, they can forget about borrowing money in the future, but what to heck, that is after the next election.

Muni's will not yield more than treasuries for long. The gap will be closed either by treasury yields going up or muni yields going down or some combination of the two.

I will be adding to muni's, EMH or no.

Dale
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first we crawl, then we walk, then we run, later we use any available transportation

[pointyhairedboss]

Dale -- Watch out on those muni fund trades. You need 6 months (not 60 days) for muni funds, otherwise you lose tax exemption on interest earned. I forget the complicated details, but there have been other threads about that here. Just a "heads up" to check things out more carefully!

Can you explain this a little more? Is this true for all state munis? Is there a technical term for this that I can enter into a search engine to isolate the search results.

[astroturf]

The Vallejo situation is sort of "old" news and it has very little to do with the municipal bonds recent performance, which is a nation-wide situation.

For a more relevant analysis, check this thread:

http://www.diehards.org/forum/....hp?t=13644

[clay]

I pretty naive about bonds, so patience please.

What are the pros and cons of the various Vanguard muni bond funds? There is the short-term, limited term, intermediate. Thanks, C.[/img]

[BostonBogle]

why is now the best time to invest in municipal bonds? if it is what is the best vehicle Vanguard offers. I'm already invested rather heavily in the Mass Tax Free Fund. Is there another fund I should consider putting money in to take advantage of the "good time" to get in and help diversify a portfolio that is stock heavy and bond light. I am 56 years old.

[grayfox]

Suppose I bought Muni fund say CA LT TE in June, added in August, December, January, February.

Then I want to tax harvest so transfer to High-Yield TE.

Is the entire tax loss disallowed because I added less than 6 months ago?
Or just the part less than 6 months old?
Does anyone know how this works?

[baw703916]

[Sammy_M]

[macdiehard]

[psteinx]

You can find AMT exposure listed on Vanguard's site, in the "Holdings" section for a given muni fund.

[Sammy_M]

[DesertDave]

[baw703916]

Hi Desert Dave,

Government agencies bonds aren't really backed by the same guarantee as treasuries, so they nearly always trade at a yield premium. Especially now, when there's a big flight to safety going on.

Best wishes,
Brad
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I don't foresee any Black Swans appearing in the future

[dbr]

[DesertDave]

[Paladin]