Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Yes, someday it might matter........ The high yield (junk) muni bond funds hold and have held for many years a lot of Illinois, Chicago, and Puerto Rico debt. Yet, the junk muni bond fund index is right near all time highs. Many are up over 5% YTD (some are up over 7%) and on course for a double digit year. Unlike junk corporates, the default rate for junk munis has been miniscule over the decades. It's just the commentators seem to make more of a fuss over it.
Sort of agree with junkster who certainly knows more than I do about this stuff. I think most of the states cited could always raise taxes (unlike Puerto Rico)because they have a lot of wealthy citizens.While I am open to the possibility that some of these people would leave the state I think that's a problem for a future crises not the next one.
One thing I've been wondering about regarding Muni's is how or if they would be affected with the Trump tax cuts coupled with his huge federal money spending cuts. Seems like states and/or localities would have to raise their taxes significantly if they want to compensate for fed-tax money being lost. If state/local money is squeezed, might there be more muni defaults? I would think some of the 'red' states would be most susceptible since they get a greater hand-out per capita for fed-dollar. I actually wonder if people in states like Mississippi, Alabama, S. Carolina, Indiana who generally vote GOP even realize they may have the most to lose.
Just pondering the huge spending cuts proposed by the Trump gang on states and localities and the effect on Municipal Bonds.
Comments
Just pondering the huge spending cuts proposed by the Trump gang on states and localities and the effect on Municipal Bonds.