Jumping Back into Municipal Bonds

It’s hard not to notice the slamming endured by the municipal bond market over the past few months. Many advisors discussed with clients a scenario in which bond pricing would gradually decline as interest rates gradually moved up. The reality was that the 10-year Treasury yield jumped over a full percent from May to June and municipal bond prices plummeted quickly. Fund investors who don’t hold bonds till maturity likely felt the pain even worse as high levels of redemptions combined with lower prices caused some municipal funds to drop 10% or more, particularly those that own longer-dated bonds. Factor in the Detroit bond crisis and cover story by Baron’s a few weeks ago slamming Puerto Rico and the picture for municipal bonds becomes even bleaker. But savvy investors must always be tracking struggling asset classes to find the point at which value starts to present itself.

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