One of the best deals going for the skittish may be so-called pre-refunded munis.
Pre-re munis maturing in 2014 were recently yielding 1.7%, the same yield offered by the Treasury.
On a tax-equivalent basis, the munis were paying 5.7% for folks in the 30% tax bracket.
So, what happens to the old munis issued before December 31, 2011 if this bill passes?
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You can see that munis offer superior yields against U.S. treasuries of all maturities.
That is, only buy high quality municipal bonds and sell the low quality munis you own.
The reason most wise investors hold portfolios of munis of average duration 3-5 years.
In the bond sector, quality beat junk and Treasuries beat munis, but not tax adjusted.
Munis are on course to be one of the best performing asset classes in 2011.
Look at the yields of munis and compare them to U.S. Treasuries of the same maturity.
That narrowing has experts concerned that the rally in riskier munis may be nearing an end.
It adds up a bright outlook for investors seeking the income and tax advantages munis offer.
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Indeed, any plan to tinker with the tax-exempt status for munis creates a double-edge sword situation.
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Previously, munis almost always yielded less than Treasuries (on a pre-tax basis), due to the tax advantage.
Only bonds from sovereign governments and blue chip corporations have a better reputation for credit-worthiness than munis.
Munis continue to remain strong today down 1 basis point after falling by between 4-6 pips yesterday.
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Ten-year AAA munis were unchanged yielding 2.26% (98.3% of treasuries) after a weak 30-year long bond auction.
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The munis which need cash are not in a position to borrow because of poor credit quality.
States, cities and counties that can barely pay their bills issued tax free and taxable munis with abandon.
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These efforts are all about transforming traditional munis into courses that no longer look or feel like munis.
If your taxable investment accounts hold one- to eight-year Treasury debt, have your broker switch into pre-re munis with similar maturities.
According to Herman, until now, munis have been a lot like microfinance: Results can be all over the map.
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In the past 20 years munis have had only 3 negative annual returns.
"That's another thing that makes munis look good right now, " Ms. Benz says.
In part for that reason, regular investors have typically shied away from kickers, favoring run-of-the-mill munis for their stability.
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The incentive to buy munis, especially for those who live in states with high income tax brackets, would disappear.
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The new courses are generally better designed and more feature-rich than bare-bones munis like Z Boaz, which opened in 1930.
And because of the cutthroat competition, many of these new public courses aren't much more expensive to play than munis.
The income from taxable Build America Bonds is subject to it, however, as would be capital gains from trading munis.
There are other Internet-based tools you can use to keep on top of the fair value for munis you own.
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