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State and Local Debt Issues
[By Staff Writers]
Municipal bonds are issued by state and local governments for building schools, bridges, hospitals, and other municipal facilities. These bonds depend upon their tax base to generate the income to pay the interest and retire the debt.
Tax-Exempt Status
The most important feature of municipal bonds is their tax-exempt status. While the interest earned is free from federal income tax, state and local governments may levy taxes on that income. Therefore, because of the tax advantage, municipalities can borrow at lower rates of interest than can corporations.
The physician-investor benefits because the tax advantages associated with the interest, albeit lower than that of corporate or government bonds, may provide a higher rate of return. Municipal bonds are usually sold in increments of $5,000, $10,000 or more, although municipal bond funds may have lower minimums.
Types
Municipal bonds are available in various types, depending upon whether the debt is paid by the issuing authority or by the revenue earned from the facility.
Conclusion
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Muni-Bond Funds
According to Christine Thompson MBA, who manages and oversees the $20 billion dollar Fidelity Municipal Income Fund, “values in the muni-market relative to other asset classes are unprecedented.”
Furthermore, she recently opined that, “we are in a cascading credit contraction that may be difficult to remedy.”
Any more interesting – or – thought provoking opinions on this topic?
Ann Miller RN MHA
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Muni Bonds
In case you ME-P readers, MDs and FAs haven’t noticed, the municipal bonds market has had a small earthquake recently.
http://thefinancebuff.com/2010/11/muni-selloff-a-preview-of-deflating-bond-bubble.html
Does it offer a preview for what can happen when a bond bubble deflates?
Sheldon
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Treasury Yields Drop From 2-Year High Amid Outlook Speculation
Sheldon, according to Dan Kruger, treasury 10-year yields fell from the highest level in more than two years as investors speculated whether the U.S. economy will improve enough for the Federal Reserve to end bond purchases in 2014.
http://www.financial-planning.com/news/treasury-yields-drop-from-two-year-high-amid-outlook-speculation-2687822-1.html?utm_campaign=daily-jan%203%202014&utm_medium=email&utm_source=newsletter
Frank
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R.I.P. Jim Lebenthal
James Lebenthal, the U.S. municipal bond market’s biggest champion and most eloquent spokesman, died following a heart attack at age 86.
http://wealthmanagement.com/people/muni-bond-champion-james-lebenthal-dies?NL=WM-27&Issue=WM-27_20141118_WM-27_470&sfvc4enews=42&cl=article_3&YM_RID=CPG09000002702210&YM_MID=114
I took Jim’s advice by investing in muni-bonds in the early 80’s; and I am still glad I did.
Dr. David E. Marcinko MBA
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