I don't invest in bonds for income; I invest in them for safety.
Unless I'm missing something, there's no after-tax yield advantage. At this moment the 5-y T yields 3.56% and the 5-y Bloomberg muni agg yields 2.24%.
In the 35% bracket, that does not compute (0.65 x 3.56 = 2.31). And that's not considering the state-tax exemption of Ts, or their greater safety.
During the Depression, about 16% of munis defaulted, although a lot of them recovered . . . eventually.
During the 2007-09 ruction, there were few defaults, but prices did fall. Most folks on this forum will own munis in a fund/ETF, so will be taking a loss if needed to pay the groceries. And if you own individual munis (not recommended because of non-systematic risk and opaque pricing), you had better hope that you've got some maturing when you need the cash.
Besides all those concerns, and if you don't need to sleep during a financial crisis, munis are fine.
Unless I'm missing something, there's no after-tax yield advantage. At this moment the 5-y T yields 3.56% and the 5-y Bloomberg muni agg yields 2.24%.
In the 35% bracket, that does not compute (0.65 x 3.56 = 2.31). And that's not considering the state-tax exemption of Ts, or their greater safety.
During the Depression, about 16% of munis defaulted, although a lot of them recovered . . . eventually.
During the 2007-09 ruction, there were few defaults, but prices did fall. Most folks on this forum will own munis in a fund/ETF, so will be taking a loss if needed to pay the groceries. And if you own individual munis (not recommended because of non-systematic risk and opaque pricing), you had better hope that you've got some maturing when you need the cash.
Besides all those concerns, and if you don't need to sleep during a financial crisis, munis are fine.
Statistics: Posted by Bill Bernstein — Mon Sep 08, 2025 11:17 am — Replies 48 — Views 5575