Monthly ArchivesDecember 2016

Why Rising Rates Is Good For Muni Bond Investors image

You're taught early in bond investing that when interest rates bond, bond prices fall.  And when interest rates fall, bond prices rise.  So you'd think by this statement that if you owned bonds, you want interest rates to continue falling.  This is simply not true.  Before we delve into this, let's cover some basics below (and you can also read our intro to muni's here: Muni Bond Basics)   Bonds have three main components: price, coupon and maturity (leaving out credit rating on these examples).  Bonds are priced at either a discount to par (below 100), at par (100), or above par (above 100).  Par is the price that the bond will mature at and almost all of the muni bonds ...

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Muni Bond Basics image

Municipal ("muni") bonds tend to be a part of our overall allocation in client portfolios since they provide stable tax advantaged cash flows.  This post breaks down the basic of muni bonds.  For information on why rising rates are good for investors, read out blog post here (Why Rising Rates are Good for Muni Investors)   What is a municipal bond? Municipal bonds are debt obligations issued by states, cities, counties and other governmental entities, which use the money to build schools, highways, hospitals, sewer systems, and many other projects for the public good. When you purchase a municipal bond, you are lending money to a state or local government entity, which in turn promises to pay you a specified amount of interest ...

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November 2016 Update image

 Market Scorecard      Monthly Commentary The month of November brought many surprises.  Very few were predicting a Trump victory and even fewer were predicting the market's positive reaction.  We saw bond prices fall precipitously while US stocks climbed to new all-time highs.  The stock market is said to be a 6 month leading indicator but it seems to have gotten ahead of itself in recent weeks.  Furthermore, we believe the selloff in bonds is overdone.  We've seen a jump in 5 year inflation expectations and growth expectations well ahead of anything actually happened.  This makes sense if we had line of sight to these things, but at this time, we believe it's wishful thinking. There's been a lot of research and thoughts over ...

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