An equivalent Treasury bond is priced to yield 4%.īut after the drama we just went through, you have to ask whether it is easier or harder to dodge a turnpike toll booth than it is to threaten to skip out on the government's debt. The bonds are insured, so the ostensible rating is AA. My favorite tax-exempt subcategory, toll road bonds, are well represented.Ī batch of North Carolina Turnpike Authority 3% bonds due in 2042 flashed on my screen for 82 cents on the dollar (up from 78 cents two weeks ago), with a yield to maturity of 4.4%. Legendary Nuveen manager John Miller just retired, but the bench is deep and his successors long-established.Īs for individual bonds, I screened my Fidelity brokerage account and found more than 200 listings with yields to maturity in 10 to 20 years of 4.25% or more ratings no worse than A-minus by Standard & Poor's or A3 by Moody's and familiar and generally reliable revenue streams from sources such as water and sewer systems, local school systems and state highways. For example, the Fidelity New Jersey Municipal Income ( FNJHX) gained 1.3% in the first week free of debt-ceiling drama.įor serious risk takers, the redoubtable Nuveen High Yield Municipal ( NHMAX) is on a roll, up 1.7% in one week and 3.5% for the year to date the distributions work out to 5.4% annualized. Residents of high-tax states such as California, New Jersey and New York likely need no reminder to seek out home-state bond funds, but I'll just say here that they are also compelling. A well-regarded actively managed municipal fund, such as the Baird Strategic Municipal ( BSNSX) or the MainStay MacKay Tax-Free Bond ( MTBAX), not only gets you a tax-free yield of 3% or a little more, but in the first week since the Biden-McCarthy treaty, plenty of such funds had already padded their total returns by about one percentage point. What should municipal bond investors buy? If you acquire cash to reinvest from a refunded bond or a matured stage of a bond ladder – or some other lump sum – I deem tax-exempts worth considering as an alternative to another round of six-month CDs and certainly to Treasuries of all maturities. If you do, I advise against selling any of them. I presume that most readers, other than young people just starting to build their IRAs and 401(k)s, have a stake in tax-exempts.
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