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Muni Bonds Shine Again

It's been a long winter for municipal bond investors. Zero interest rate policy over the long term made them a poor value. I honestly don't know how anyone could have recommended tying up funds at such low rates for such long periods of time. Eventually, any longer term paper HAD to decline once the Fed stopped accommodating, and shorter dated paper yielded next to nothing. You couldn't buy stale bread with it.

It was kind of depressing watching hundreds of thousands of dollars worth of municipal debt in client accounts get called in as fast as the issuers were permitted to do so. Many municipalities rolled over their 4% and 5% coupons into new debt with coupons under TWO percent! A good thing for the fiscal health of a great many communities who could now have lower debt service, or finance some sorely needed improvements on the cheap.

Not so good for the investing public, however.

But, with Fed policy dramatically changed in so short a time, municipals bring value once again. Aside from many bond issues beating the dividend payments of many stocks, adding in the tax free benefit along with government backing make them highly competitive as a yield instrument. That's a solid combination of strong yield with a very low risk band compared to equities.

I got my start in debt instruments like these, and it was kind of sad to have to put away all of that experience on the back shelf for so long a time. Yields were so low, it was hardly worth investing any research time in rooting out good values. But with the rate market in a new place, it's like welcoming an old friend I haven't seen in years. Good returns along with confidence in asset protection is a great place to be in for an investor.

If you're in a high tax bracket, or looking to build a portfolio generating solid income with a stronger margin of security than most corporates, feel free to contact me at

Who knows how long this window of opportunity will last?

(Not an offer to sell securities.)

September 20, 2022


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