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I see very few mentions and recommendations of pre-refunded muni bonds despite their attractive attributes (tax exempt and just as safe as US Treasuries). Why is that? Do people just “forget” about them or is there a good reason to avoid them?
I had to google pre-refunded bonds. Are you suggesting one should consider buying individual pre-refunded bonds? Or perhaps purchase a mutual fund which only owns such bonds? Or perhaps a mutual fund which includes them as part of a portfolio of other types of muni bonds?
I'm not smart enough to know what individual muni bonds one should take a chance on, pre-refunded or otherwise. When you say these are "just as safe" as treasuries, I assume they that yield is lower than other types of muni bonds. That is, one pays a "price" in order to buy "safety"?
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".
They are included in normal indexes. For example, the Bloomberg Barclays Short 1 to 5 Year Index has a 27% weighting in pre-refunded bonds, as of December 26, 2017 (1)
New issuance was curtailed under the recent tax package and eventually they will disappear I believe.
Anyway, if they are as safe as treasuries, they likely yield less. Munis generally don't default much, especially the highest grade. So stick to those going forward if you like.
I don't think there is that much credit risk in short duration highly rated muni bonds, but yeah pre-refunded munis get recommended sometimes for short high-credit-quality investments.
https://www.schwab.com/resource-center/ ... nded-bonds
https://www.lordabbett.com/en/perspecti ... -bill.html