Why is Vanguard Intermediate-Term Tax-Exempt Fund down?

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WildDog
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Why is Vanguard Intermediate-Term Tax-Exempt Fund down?

Post by WildDog » Tue Oct 14, 2008 5:41 pm

Hello,

Does anyone know why this fund is down so much?
It has gone down quite a bit in the last 2 weeks.

Thanks

Sherwood
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Post by Sherwood » Tue Oct 14, 2008 6:25 pm

This seems to be on lots of posters minds. I asked a few weeks ago (search under VWITX) and got several reassuring replies. As I'm sure you know, the darn thing has now taken to falling 1% a day!!! This is the wildest "boring" fund I've ever seen. I think I'm going to tax loss harvest half of my holding and be a good Boglehead with the rest.

scotters201
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Post by scotters201 » Tue Oct 14, 2008 6:36 pm

Sherwood wrote:This seems to be on lots of posters minds. I asked a few weeks ago (search under VWITX) and got several reassuring replies. As I'm sure you know, the darn thing has now taken to falling 1% a day!!! This is the wildest "boring" fund I've ever seen. I think I'm going to tax loss harvest half of my holding and be a good Boglehead with the rest.
I think it's just out of fear from investors about the financial health of states over the next year or possibily several years..

VWITX is a national muni..but if you look at individual state muni's across the country,it's across the board fear..so when it's widespread national fear from investors..even a national muni index wouldn't help much ..

California Intermediate-Term Tax-Exempt VCAIX -4.60%
Massachusetts Tax-Exempt VMATX -6.17%
New Jersey Long-Term Tax-Exempt VNJTX -5.84%
Pennsylvania Long-Term Tax-Exempt VPAIX –6.22%

etc..........the list goes on,but they all pretty much look like above..

richard
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Post by richard » Tue Oct 14, 2008 6:48 pm

There are two theories:

1) Some investors need to raise funds and are selling anything liquid, including munis, driving down price

2) Concerns about the creditworthiness of the states.

These theories are not mutually exclusive.

Gekko
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Post by Gekko » Tue Oct 14, 2008 6:55 pm

yes, we're really getting beat up on the NAV on these municipal bond funds and i'm not sure the yields are rising enough to offset the pain. are they? i thought bonds were supposed to zig when the market zags - or at least pay a proportionately higher yield. it seems that the money market (perhaps temporarily) is paying just as much with no NAV risk/volatility.

i didn't sign up for this. this was supposed to be part of my "safe" bucket along with the municipal money market. i don't need this kind of volatility in this bucket.

i fully expect the NAVs to move back up to where they were - the only question is how long it will take. i'm prepared to hold on for as long as it takes. i keep reinvesting all yields and continue to invest a fixed amount 2x per month back into this fund.

i was just reachin' for a little more yield.....

i guess what they say is true - "There's no free lunch!"

ain't that the truth.

best wishes all.

nittybitty
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Post by nittybitty » Wed Oct 15, 2008 1:52 am

It's a crisis and potentially way worse than most people really understand. The spreads are huge will hopefully correct themselves.

Cookiekaikai
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Post by Cookiekaikai » Wed Oct 15, 2008 9:52 am

I believe Rick Edleman advised a caller to "sell" this fund in his recent radio program. I am more upset about this fund dropping than my stock funds dropping.

Choose hour 2 of the 10/11 show
http://www.ricedelman.com/cs/radio_show/past_shows
Last edited by Cookiekaikai on Wed Oct 15, 2008 2:25 pm, edited 1 time in total.
Thanks All, Edmond

bookshot
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Post by bookshot » Wed Oct 15, 2008 9:59 am

Edelman has always advised against buying munis, no matter what your tax bracket. His reasoning as to why was never clear.
I would NOT take Edelman's advice on anything. His show is a thinly disguised infomercial for his investment and mortgage companies. Last spring, he was predicting a rising stock market and a housing turn-around in August. He used to tell everyone that they should take out as large a mortgage that they could manage, and still advises everybody, regardless of circumstances, to not pay off their mortgages. He used to denigrate indexed funds - until he became a DFA advisor. I saw him the other day on TV with more happy talk, telling everybody to load up on stocks, everything was great - even the interviewer was aghast. Serious conflicts of interest on many levels.

Helga
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VWITX (Intermediate Municipal Bond Fund)

Post by Helga » Thu Oct 16, 2008 12:49 pm

I called Vanguard this morning and also asked for the reason why the fund has such continuous drop-off in NAV. The answer I received is mass-redemptions. The Vanguard person insisted there is no problem with the quality of the bonds inside this fund. He also said they do not depend on other companies' ratings in regards to quality. I compared the chart for this fund with a similar fund from Fidelity and the decline looks similar.
My conclusion is that we who are holding on are getting unfairly penalized
because of the redemptions.

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grayfox
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Re: VWITX (Intermediate Municipal Bond Fund)

Post by grayfox » Thu Oct 16, 2008 1:03 pm

Helga wrote:I called Vanguard this morning and also asked for the reason why the fund has such continuous drop-off in NAV. The answer I received is mass-redemptions. The Vanguard person insisted there is no problem with the quality of the bonds inside this fund. He also said they do not depend on other companies' ratings in regards to quality. I compared the chart for this fund with a similar fund from Fidelity and the decline looks similar.
My conclusion is that we who are holding on are getting unfairly penalized
because of the redemptions.
Can massive redemptions by other investors cause permanent losses for investors who stay in the fund?

I realize the fund will have to sell bonds to raise cash for the redemptions, but only in proportion to the amount of redemptions. In other words, if half the investors bailed out at the bottom they would have to sell half the bonds at the bottom. However the remaining diehards who still own the rest of the bonds should not realize a loss if they don't sell.

Anybody who understands how mutual funds operate care to comment?

jsnbrnd
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Re: VWITX (Intermediate Municipal Bond Fund)

Post by jsnbrnd » Thu Oct 16, 2008 1:31 pm

grayfox wrote:

Can massive redemptions by other investors cause permanent losses for investors who stay in the fund?

I realize the fund will have to sell bonds to raise cash for the redemptions, but only in proportion to the amount of redemptions. In other words, if half the investors bailed out at the bottom they would have to sell half the bonds at the bottom. However the remaining diehards who still own the rest of the bonds should not realize a loss if they don't sell.

Anybody who understands how mutual funds operate care to comment?
Well, if the sale of bonds from the fund results in capital gains, they will be passed on to the shareholders, who will have to pay taxes on the gains.

newport1
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Re: VWITX (Intermediate Municipal Bond Fund)

Post by newport1 » Thu Oct 16, 2008 1:44 pm

grayfox wrote:
Helga wrote:I called Vanguard this morning and also asked for the reason why the fund has such continuous drop-off in NAV. The answer I received is mass-redemptions. The Vanguard person insisted there is no problem with the quality of the bonds inside this fund. He also said they do not depend on other companies' ratings in regards to quality. I compared the chart for this fund with a similar fund from Fidelity and the decline looks similar.
My conclusion is that we who are holding on are getting unfairly penalized
because of the redemptions.
Can massive redemptions by other investors cause permanent losses for investors who stay in the fund?

I realize the fund will have to sell bonds to raise cash for the redemptions, but only in proportion to the amount of redemptions. In other words, if half the investors bailed out at the bottom they would have to sell half the bonds at the bottom. However the remaining diehards who still own the rest of the bonds should not realize a loss if they don't sell.

Anybody who understands how mutual funds operate care to comment?
Presumably bonds sold to fund current redemptions will result in capital losses. These losses are valuable because they can be used to offset gains for the next eight years.

The danger for mutual fund investors is to be the last guy standing if investors redeem en masse when the portfolio has appreciated substantially. That would result in a big capital gain distributions.

The good news, however, is that mutual fund investors love to buy high and sell low.

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MossySF
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Re: VWITX (Intermediate Municipal Bond Fund)

Post by MossySF » Thu Oct 16, 2008 2:07 pm

grayfox wrote:I realize the fund will have to sell bonds to raise cash for the redemptions, but only in proportion to the amount of redemptions. In other words, if half the investors bailed out at the bottom they would have to sell half the bonds at the bottom. However the remaining diehards who still own the rest of the bonds should not realize a loss if they don't sell.
Bond prices are determined by buyers & sellers. If there is mass redemptions across the market for muni funds, the value of the bonds will go down because that's what the market says is now the current price for them. You could be in a fund that only includes you and mass redemptions in other funds will affect you. (If you hold individual munis in a brokerage account, your brokerage account will show you the drops in value.)

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stratton
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Re: VWITX (Intermediate Municipal Bond Fund)

Post by stratton » Thu Oct 16, 2008 3:06 pm

Helga wrote:I called Vanguard this morning and also asked for the reason why the fund has such continuous drop-off in NAV. The answer I received is mass-redemptions. The Vanguard person insisted there is no problem with the quality of the bonds inside this fund. He also said they do not depend on other companies' ratings in regards to quality. I compared the chart for this fund with a similar fund from Fidelity and the decline looks similar.
My conclusion is that we who are holding on are getting unfairly penalized
because of the redemptions.
I've been thinking about TLHing the fund and moving into 60/40 long/short tax-exmept muni natl funds. So I get the (TLH - 6 months income).

Then I'm in two bond funds I don't necessarily want to be in. Admitedly its the approximate same duration and I get to take advantage of reversion to mean on the long term tax-exempt fund. The problem is if I move back to the intermediate fund I have to pay capital gains on the long term fund. Because of the impact of not counting the six months distributions this whole function costs me money because of possible short term capital gains taxes.

Moving to an equivalent Fidelity bond fund means higher expenses and less credit quality. Muni ETFs aren't nearly diversified enough. Going all into a shorter term bond fund means I bought high and sold low.

Just sitting and ignoring the TLH on a bond fund may be better than doing "something." I can definitely see why Larry Swedroe likes individual bonds. However, I don't have this expertise. Vanguards ER is hard to beat for their credit quality and diversification.

Paul

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Re: VWITX (Intermediate Municipal Bond Fund)

Post by Paladin » Thu Oct 16, 2008 3:26 pm

stratton wrote:
Helga wrote:I called Vanguard this morning and also asked for the reason why the fund has such continuous drop-off in NAV. The answer I received is mass-redemptions. The Vanguard person insisted there is no problem with the quality of the bonds inside this fund. He also said they do not depend on other companies' ratings in regards to quality. I compared the chart for this fund with a similar fund from Fidelity and the decline looks similar.
My conclusion is that we who are holding on are getting unfairly penalized
because of the redemptions.
I've been thinking about TLHing the fund and moving into 60/40 long/short tax-exmept muni natl funds. So I get the (TLH - 6 months income).

Then I'm in two bond funds I don't necessarily want to be in. Admitedly its the approximate same duration and I get to take advantage of reversion to mean on the long term tax-exempt fund. The problem is if I move back to the intermediate fund I have to pay capital gains on the long term fund. Because of the impact of not counting the six months distributions this whole function costs me money because of possible short term capital gains taxes.

Moving to an equivalent Fidelity bond fund means higher expenses and less credit quality. Muni ETFs aren't nearly diversified enough. Going all into a shorter term bond fund means I bought high and sold low.

Just sitting and ignoring the TLH on a bond fund may be better than doing "something." I can definitely see why Larry Swedroe likes individual bonds. However, I don't have this expertise. Vanguards ER is hard to beat for their credit quality and diversification.

Paul
There are mass redemptions in the muni market (institutions, hedge funds etc) but Vanguard today assured me there are no mass redemptions in this fund.

The fund is marked to market every day and it is (mostly) the price declines in the market that is depressing the NAV of the fund.

The difference with this downtown as has been mentioned in other threads is the sell off of all bonds except ST Treasuries; even TIPS have been sold off.

Hope this helps.

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wab
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Re: VWITX (Intermediate Municipal Bond Fund)

Post by wab » Thu Oct 16, 2008 4:18 pm

stratton wrote:Just sitting and ignoring the TLH on a bond fund may be better than doing "something."
Yeah, it's not like there's a shortage of TLH opportunities, eh? :)

I did a little market timing and shortened up my bond duration a while back, but now that the market seems to be signaling deflation fears, I'm extending duration. I'm too chicken to go long-term, but I moved into intermediate-term munis today. Even if it craters, I'm content with the yield.

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stratton
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Re: VWITX (Intermediate Municipal Bond Fund)

Post by stratton » Thu Oct 16, 2008 8:04 pm

wab wrote:
stratton wrote:Just sitting and ignoring the TLH on a bond fund may be better than doing "something."
Yeah, it's not like there's a shortage of TLH opportunities, eh? :)

I did a little market timing and shortened up my bond duration a while back, but now that the market seems to be signaling deflation fears, I'm extending duration. I'm too chicken to go long-term, but I moved into intermediate-term munis today. Even if it craters, I'm content with the yield.
I did that with TIPS. My "solution" to this whole issue might be buy more intermediate muni. Jack Bogle appears to favor the Limited Term muni. That *might* be the sweet spot on most yield curves, but the muni yield curve is steep enough intermediate looks decent.

Paul

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Post by Gekko » Thu Oct 16, 2008 8:36 pm

holding my VG muni bond fund is like death by a thousand cuts. every day i cringe before i hit refresh to see the new NAV - and every day it's down by a few more cents.

question - if muni bond redemptions are causing this NAV reduction in our muni bond funds, does this mean that we'll have a nice big fat outsized capital gain distribution at the end of this year in our muni funds? that would make these cuts less painful - but if it's like a stock fund, the NAV would go down further proportionate with the distribution?

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Post by Sherwood » Thu Oct 16, 2008 9:48 pm

“holding my VG muni bond fund is like death by a thousand cuts” “i didn't sign up for this”

That sums up my thinking entirely. I'm down about $6k in VWITX and it's driving me nuts. I truly don't think I can stay the course. The weird part is I'm down 60 or 80k on stocks and REITS etc (I really don't know) and it doesn't phase me much at all. That's money I need in 2030, muni bonds are real money.

I've heard lots of reassuring words here and in other places. What I would like to hear is an argument that it's different this time and the NAV may not recover for a long time. Then I think I can make a rational choice.

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Post by schwarm » Thu Oct 16, 2008 10:19 pm

Sherwood wrote: I've heard lots of reassuring words here and in other places. What I would like to hear is an argument that it's different this time and the NAV may not recover for a long time. Then I think I can make a rational choice.
If the NAV doesn't recover for a long time, doesn't that mean that the yield will be high for a long time?

FWIW, I sunk a chunk of change into of VG short and mid-term munis earlier this year (for tax reasons unique to us this year). I was going to sell the funds in Jan, but I will not really need the TLH in 2009, so I'll probably just sit on them and see what happens.

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grayfox
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Post by grayfox » Thu Oct 16, 2008 11:50 pm

Whether or not the NAV recovers is a secondary concern to me. The only problem is that I am locked in to the muni fund unless I want to sell low, which I don't. So NAV down is a minor annoyance.

My primary concern is will the muni funds continue to pay the same distribution each month, or will it be cut? That would be bad.

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wab
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Post by wab » Fri Oct 17, 2008 12:07 am

grayfox wrote:My primary concern is will the muni funds continue to pay the same distribution each month, or will it be cut? That would be bad.
No, the distribution will not be cut. The only reason the NAV is down is because yield is up. Bonds are self-healing (well, high-quality bonds anyway). Eventually the distributions will offset the NAV drop.

You can safely ignore NAV drops for munis. It's just interest rate risk showing up. There is virtually no default risk.

Waiting for Godot
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Post by Waiting for Godot » Fri Oct 17, 2008 1:16 am

Per Vanguard's web site.

Duration
A measure of the sensitivity of bond—and bond mutual fund—prices to interest rate movements. For example, if a bond has a duration of two years, its price would fall about 2% when interest rates rose one percentage point. On the other hand, the bond's price would rise by about 2% when interest rates fell by one percentage point.

The intermediate tax exempt fund yielded about 3.5%-3.6% at the beginning of this year, and it now yields 4.38%, which is just under a 1% rise in yield. Therefore, given that the bond fund has a duration of 5.6 years, I would expect the rise in yield to cause the NAV to drop about 5%. YTD performance of the fund is -5.37%. If I understand duration correctly, this would seem to explain the YTD performance. If you want less volatility, then you should have a short-term MUNI fund. However, Larry Swedroe said the optimum risk/reward for MUNIs is about 5 years, so I think Vanguard's intermediate funds offer a better risk/reward opportunity than the short-term muni funds. Frankly, 4.38% tax exempt seems like a good deal. Someone please correct me if I am wrong. Been wrong before. :D

Helga
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VWITX

Post by Helga » Fri Oct 17, 2008 1:06 pm

Well, I exchanged my VWITX for the taxfree money market fund yesterday with a loss of +$8000. Been in this fund for years. I was informed that I cannot exchange back until Dec 15, 08. Actually, I found another solution if I do want to get back into taxfree intermediate municipals by using the Fidelity FLTMX fund. It is rated 5 Stars by Morningstar (4 Stars for Vanguard fund) and the Fidelity bond fund did not drop quite that much percenage wise.
Funny thing is, I can stomach the drop in stocks since I use them as the "third bucket" in the Ray Lucia way of investing, meaning they are for the next 15 years.

thorn
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Post by thorn » Fri Oct 17, 2008 1:21 pm

<I>
Record Weekly Outflow

Investors pulled almost $400 million out of municipal bond mutual funds during September, the first monthly outflow this year, according to AMG Data Services of Arcata, California. Redemptions accelerated this month, with fund outflows rising to $3.4 billion so far, including a record $2.3 billion in the week ended Oct. 15, the data show.

``We are still in a situation of no buying and lots of forced selling,'' said Ron Fielding, senior portfolio manager at OppenheimerFunds Inc. in Rochester, New York, with $23 billion under management.

Wall Street firms had already been pulling back earlier in the year. Broker-dealers, which abandoned the $330 billion auction-rate market after being inundated with unwanted securities, cut their holdings of municipal bonds and notes 22 percent to $51.8 billion from a record $66.1 billion at the end of the first quarter, according to Fed data.
</I>



The system would not let me leave a link :(

The story is on Bloomberg...

Paladin

Post by Paladin » Fri Oct 17, 2008 2:00 pm

Waiting for Godot wrote:Per Vanguard's web site.

Duration
A measure of the sensitivity of bond—and bond mutual fund—prices to interest rate movements. For example, if a bond has a duration of two years, its price would fall about 2% when interest rates rose one percentage point. On the other hand, the bond's price would rise by about 2% when interest rates fell by one percentage point.

The intermediate tax exempt fund yielded about 3.5%-3.6% at the beginning of this year, and it now yields 4.38%, which is just under a 1% rise in yield. Therefore, given that the bond fund has a duration of 5.6 years, I would expect the rise in yield to cause the NAV to drop about 5%. YTD performance of the fund is -5.37%. If I understand duration correctly, this would seem to explain the YTD performance. If you want less volatility, then you should have a short-term MUNI fund. However, Larry Swedroe said the optimum risk/reward for MUNIs is about 5 years, so I think Vanguard's intermediate funds offer a better risk/reward opportunity than the short-term muni funds. Frankly, 4.38% tax exempt seems like a good deal. Someone please correct me if I am wrong. Been wrong before. :D
The NAV has fallen 11% in the last 4 weeks. Unfortunately the rise in yields does not explain what is happening in muni funds.

Please see my post above.

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Post by mithrandir » Sat Oct 18, 2008 8:05 am

Gekko wrote: i was just reachin' for a little more yield.....

i guess what they say is true - "There's no free lunch!"
Yup, I got bit by reaching for too much yield.

VWITX's YTD -5.42% is not devastating. In fact, we should expect returns like this occasionally. Of course, why do the big losses have to occur when equities are also tanking? I don't want high correlations!

It's like the bogeyman, but I'm pointing my finger at inflation for the blame. I would not have stretched for yield if oil hadn't soared to $146 this summer and sent inflation expectations through the roof. It's very, very difficult to settle for a negative real return on the yield.

I know, I can hear larry in my head "don't look at investments in isolation". I should have gone shorter duration even if the yield was (once) negative in real terms as the shorter duration funds lost far less in the past 6 weeks.

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daryll40
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Post by daryll40 » Sat Oct 18, 2008 8:31 am

If inflation is the bogeyman, why are TIPS also declining similarly?

Larry Swedroe's explaination, I think, makes more sense, Hedge funds liquidating everything to raise cash. Even their "good" stuff.

dizzy
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Post by dizzy » Sat Oct 18, 2008 11:20 am

I think a bond fund is best viewed as a fixed income investment. My monthly distribution from VCADX has been remarkably constant, the NAV and the yield typically balance each other out. I think this makes sense, since the underlying bond portfolio is throwing off a predictable $$ amount every month, so that the income per share is relatively constant. In fact I just called vanguard and as of today, my october distribution will be well within its usual small monthly variance, and nothing to be alarmed about.

That being said, there is certainly an element of flight from muni's which is driving the NAVs down, I think the NAV is more a reflection of the supply/demand imbalance, than the actual value of the underlying income stream. However, I'm no expert and I'd be interested in other's thoughts.

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alvinsch
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Barron's has article on the bargains in muni land

Post by alvinsch » Sat Oct 18, 2008 11:31 am

Barron's has an article on the bargains in muni land and lists VWITX as one of the options. I'll provide the link but you need to have a subscription I believe to read it so I'll add a snippet.

http://online.barrons.com/article/SB122 ... _home_left
The Yields Are Staggering

THE CREDIT MARKET'S WOES are benefitting one group: buyers of municipal bonds, who have seen prices plunge and yields soar. Munis, some of which offer long-term tax-free yields topping 6%, have almost never looked so attractive, relative to U.S. Treasuries.

"The market is way undervalued," says Laura Milner, a portfolio manager at SCM Advisors in San Francisco. "It's more the result of liquidity than credit problems. You don't have to stretch in terms of credit quality to get high yields." She favors state general-obligation bonds and revenue bonds for essential services, like water and sewers.

THE MARKET HAS BEEN HURT by selling pressure from hedge funds, issuers of structured notes and mutual funds, which have been experiencing redemptions. Buyers have been scarce, with retail investors now the main source of demand. The problem is that individuals can absorb only so much supply. There also is concern that the weakening economy will lead to gaping budget deficits at state and local governments, hurting the credit quality of municipal debt. Investors can take comfort, however, in the fact that munis historically have had much better credit performance than corporate bonds. Even during the Great Depression, no state defaulted on its general-obligation bonds, and overall muni default rates remained very low.
...

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Why is Vanguard Intermediate-Term Tax-Exempt Fund down?

Post by YDNAL » Sat Oct 18, 2008 11:51 am

stratton wrote:I did that with TIPS. My "solution" to this whole issue might be buy more intermediate muni. Jack Bogle appears to favor the Limited Term muni. That *might* be the sweet spot on most yield curves, but the muni yield curve is steep enough intermediate looks decent.
Paul,

I use LT muni (no State income tax here) and have suggested it to others requesting feedback in the forum. Am I as smart as Jack? :lol:

Vanguard Limited-Term Tax-Exempt Fund Admiral Shares (VMLUX)
52-wk high and low
01/23/2008 $10.97 3.19%
10/16/2008 $10.51 3.72%
1 Year 2.95%
3 Year 3.22%
5 Year 2.44%
10 Year —
Since Inception 02/12/2001 3.26%

Regards,
Landy
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

Waiting for Godot
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Post by Waiting for Godot » Sat Oct 18, 2008 12:47 pm

Paladin, I'm assuming you're referring to the long-term tax exempt fund. I was referencing the intermediate-term one. However, that point is mute, because I agree the duration does not explain the drop in NAV given that the long-term fund is off about 10% and the duration is 7.4 years.

Vanguard put out an article stating what you posted earlier.

https://personal.vanguard.com/us/Vangua ... 08_ALL.jsp

mithrandir
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Post by mithrandir » Sun Oct 19, 2008 6:42 am

daryll40 wrote:If inflation is the bogeyman, why are TIPS also declining similarly?

Larry Swedroe's explaination, I think, makes more sense, Hedge funds liquidating everything to raise cash. Even their "good" stuff.
Sorry, my statement was misleading. I do not blame inflation for the drop in NAVs and the rise in yields for the muni funds. I rather blame inflation for my decision to go longer on the yield curve, i.e. I demanded a higher yield to counteract inflation and that required buying more intermediates than shorts.

Gekko
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Re: Why is Vanguard Intermediate-Term Tax-Exempt Fund down?

Post by Gekko » Sun Oct 19, 2008 7:59 am

YDNAL wrote:
stratton wrote:I did that with TIPS. My "solution" to this whole issue might be buy more intermediate muni. Jack Bogle appears to favor the Limited Term muni. That *might* be the sweet spot on most yield curves, but the muni yield curve is steep enough intermediate looks decent.
Paul,

I use LT muni (no State income tax here) and have suggested it to others requesting feedback in the forum. Am I as smart as Jack? :lol:

Vanguard Limited-Term Tax-Exempt Fund Admiral Shares (VMLUX)
52-wk high and low
01/23/2008 $10.97 3.19%
10/16/2008 $10.51 3.72%
1 Year 2.95%
3 Year 3.22%
5 Year 2.44%
10 Year —
Since Inception 02/12/2001 3.26%

Regards,
Landy

http://finance.google.com/finance?clien ... MUTF:VMLUX

congrats. this LT bond fund has held up well so far in 2008. perhaps because it's multi-state vs. state-specific the redemptions don't hammer the NAV as much because the same liquidity issues are not there? ie many states for fund manager to choose from and not being restricted to one state?

Gekko
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Post by Gekko » Fri Dec 12, 2008 6:50 pm

still painful.

Dylanwise
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Post by Dylanwise » Fri Dec 12, 2008 10:17 pm

It got better for awhile.

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nisiprius
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Post by nisiprius » Fri Dec 12, 2008 11:57 pm

Gekko wrote:yes, we're really getting beat up on the NAV on these municipal bond funds and i'm not sure the yields are rising enough to offset the pain. are they?
Of course they are. Bonds pay out contractually fixed interest payments that don't change just because the market value of the bond has dropped. Whether that "offsets the pain" is a sort of Zen koan, but it is a simple matter of arithmetic and is the same for any kind of bond at any time.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Paladin

Post by Paladin » Sat Dec 13, 2008 1:03 am

nisiprius wrote:
Gekko wrote:yes, we're really getting beat up on the NAV on these municipal bond funds and i'm not sure the yields are rising enough to offset the pain. are they?
Of course they are. Bonds pay out contractually fixed interest payments that don't change just because the market value of the bond has dropped. Whether that "offsets the pain" is a sort of Zen koan, but it is a simple matter of arithmetic and is the same for any kind of bond at any time.
Maybe I am looking at it the wrong way but CA IT TE NAV has dropped say 6% and heading south. If the NAV does not recover then it's going to take a long time for the SLIGHTLY increased yield to make up the loss.

fundtalk
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Post by fundtalk » Sat Dec 13, 2008 10:40 am

It seems like the massive forced liquidations in stocks, TIPS, etc. has let up and some normalcy has returned except for muni's. It is amazing how every day the muni funds bleed out a little more.

It also doesn't seem like the yield has been rising like you would expect. The yield on VWITX a year ago was 4.1% with an NAV of $13.26. It is currently listed as 4.12% with an NAV of $12.28. I'm wondering if the cycle of redemptions will gain momentum and continue to drive down prices. I watched this happen to an ultra short bond fund in my 401k which was reaching for yield by investing in CMO'S (look up the chart for SWYPX). Obviously, this shouldn't happen to this fund because of the quality of its holdings, but it does give a frightening example of the effect of investors rushing for the exit in a fund with illiquid securities.

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