Tags: Municipal | bonds | safety | attractive | yields

WSJ: Muni Bonds Offer Safety, Juicy Yields

By    |   Monday, 14 Nov 2011 08:42 AM

Municipal bonds represent an attractive choice for investors who want both safety and yield, The Wall Street Journal reports.

Munis haven’t been infected with contagion from the European bond meltdown and haven’t suffered from last week’s bankruptcy filing by Jefferson County, Ala. – the largest municipal failure in U.S. history.

In the past, municipal bankruptcy rates have been quite low, and for now at least, it looks like that record will hold up.
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"Municipals have held on to their place as the second safest investment in America behind Treasury bonds," Greg Serbe of Lebenthal Asset Management tells The Journal.

And munis offer a clear yield advantage over Treasurys, even before accounting for taxes. The average yield for 10-year triple-A munis stands at about 2.55 percent, compared to 2.06 percent for 10-year Treasurys.

With munis free from federal taxes while Treasurys aren’t, the 2.06 percent Treasury yield actually compares to a 3.4 percent yield for munis for a middle-class investors in the 25 percent tax bracket.

If you do invest in munis, you might want to stick to triple-A rated issues to avoid any fallout from the financial woes facing so many cities and states.

“State general obligation bonds are at the top of the food chain,” Stan Richelson, a Philadelphia financial planner and co-author of “Bonds: The Unbeaten Path to Secure Investment Growth,” tells The New York Times.

“First look at quality, then returns.”

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Municipal bonds represent an attractive choice for investors who want both safety and yield, The Wall Street Journal reports. Munis haven t been infected with contagion from the European bond meltdown and haven t suffered from last week s bankruptcy filing by Jefferson...
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Monday, 14 Nov 2011 08:42 AM
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