Some decent Muni's around if you look

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fx24
Posts: 54
Joined: Wed Dec 28, 2011 10:23 pm

Some decent Muni's around if you look

Post by fx24 »

Muni's have been depressed YTD and seemingly out of favor. I notice apparently some people selling some decent bonds and wanted to share that it might not be a bad time to look around. For example, I picked up an Indiana hospital Rev bond due 2020, S&P A rated, yielding 3.2% tax free (orig coupon 5.0). Seen similar popping up here and there.
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BHCadet
Posts: 391
Joined: Sat Jan 14, 2012 11:47 pm
Location: SoCal

Re: Some decent Muni's around if you look

Post by BHCadet »

The Vanguard CA Interm-Term Tax-Exampt Adm fund (VCADX) with expense ratio of 0.12% has YTD return of 1.04%.
And the SEC yield is 1.63%.
Sweet...
MN Finance
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Joined: Sat Dec 22, 2012 9:46 am

Re: Some decent Muni's around if you look

Post by MN Finance »

Individual munis are not without risk. You certainly have liquidity issues - reinvesting interest payments and liquidating prior to maturity would cause your net return to be lower. I would also be cautious about default risk in revenue bonds. They are not guaranteed by the local municipality, they are just allowed to be financed at municipal rates to encourage development and/or allow the project lower interest terms. I am not in the camp that says municipalities will default but certainly projects will and do default.
Scooter57
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Re: Some decent Muni's around if you look

Post by Scooter57 »

What's the call status? That can also make them less liquid.
Leesbro63
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Re: Some decent Muni's around if you look

Post by Leesbro63 »

A bond with a coupon of 5% now yielding 3.2% will require paying a premium that you won't get back. And that's fine as long as you understand. For many, it's a psychological deal-breaker, even though it's not mathematically a deal breaker. Also be careful with high coupon bonds to be sure you know all the call features. Any municipality that can refinance at a lower rate, will.
MN Finance
Posts: 1926
Joined: Sat Dec 22, 2012 9:46 am

Re: Some decent Muni's around if you look

Post by MN Finance »

Leesbro63 wrote:A bond with a coupon of 5% now yielding 3.2% will require paying a premium that you won't get back. And that's fine as long as you understand. For many, it's a psychological deal-breaker, even though it's not mathematically a deal breaker. Also be careful with high coupon bonds to be sure you know all the call features. Any municipality that can refinance at a lower rate, will.
Good point. The bond mentioned here probably doesn't have a 3.2% YTM, it has a 3.2% CY (I assume) which makes the YTM probably much closer to 1% (speculating)
Topic Author
fx24
Posts: 54
Joined: Wed Dec 28, 2011 10:23 pm

Re: Some decent Muni's around if you look

Post by fx24 »

Actually 3.2% is the Yield-to-Worse, and it is call protected. The cusip is 45471ADL3. I intend to hold to maturity but agree about interest rate risks. Overall, my intent was only attempting to offer help to those who desire individual muni's.
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