Investing in municipal bonds and their related exchange traded funds (ETFs) is a tax-free way to stash away wealth, but muni bonds from debt-ridden local governments are now being scrutinized.
Muni bonds are federal tax-free and relatively low risk, but a lot of bonds available are now from riskier borrowers, such as California, according to the MarketPlace.
In a bid to save money and reduce rates, local governments are refinancing through bonds, but investors are demanding higher interest payments since California is billions in debt. Consequently, cities and counties are sitting out the market “indigestion” through December and will hold back selling bonds until the demand is back. [Muni ETFs Take a Beating; Time to Sell?]
The Commerce Department’s Bureau of Economic Analysis stated that last year’s drop in GDP was due to lower activity in construction and manufacturing of durable goods, reports Jim Puzzanghera for The Los Angeles Times. California’s output dropped 2.2%, ranking the state’s economic activity at 32nd nationwide.
For more information on municipal bonds, visit our municipal bonds category. These munis are an opportunity to capture tax-free yields, but for many investors, they may be seen as too risky to touch. Where do you stand?
- iShares S&P CA AMT-Free Municipal Bd (NYSEArca: CMF). Yield 4.03%.
- PowerShares Insured California Muni Bond (NYSEArca: PWZ). Yield 4.02%.
- SPDR Nuveen Barclays Capital CA Muni Bd (NYSEArca: CXA). Yield 4.22%.
Max Chen contributed to this article.
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.