Municipal bonds and related exchange traded funds (ETFs) are in a bit of a pickle, but billionaire Warren Buffett has stepped in to help.
As we wrote yesterday, while municipal bonds are currently offering attractive yields, there’s some imminent downgrading risk. That’s because the insurers that back them have also branched out into insuring other more profitable and risky investments such as subprime mortgages, and we all know by now how that’s been going.
To keep the troubled industry afloat, Buffett came forward and offered to add a second level of insurance – up to $800 billion, reports Josh Funk at the Associated Press. Buffett said the move has nothing to do with altruism, and everything to do with making money.
Hey, the guy is honest.
Buffett’s offer extends only to municipal bonds, and not the complicated, risky investments.
Investors looking to capitalize on the yields municipal bonds are currently offering have a range of options:
- PowerShares Insured National Muni Bond (PZA), 4.2% yield (6.46% tax equivalent yield) as of Jan. 31
- Market Vectors Lehman AMT-Free Int Muni (ITM), 3.49% yield (5.36% tax equivalent yield) as of Feb. 11
- iShares S&P National Municipal Bond (MUB), 3.36% yield (5.16% tax equivalent yield) as of Feb. 8
- SPDR Lehman Municipal Bond (TFI), 3.34% yield (5.13% tax equivalent yield) as of Feb. 11
- PowerShares VRDO Tax-Free Weekly (PVI), 2.74% yield (4.21% tax equivalent yield) as of Jan. 31
- SPDR Lehman Short Term Municipal Bond (SHM), 2.5% yield (3.84% tax equivalent yield) as of Jan. 17
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.