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> E.g. I believe safe municipal bonds are now returning around 3% after tax. If you want to get more than that you have to buy bonds with a higher risk of defau
by jeromec 17y ago
> E.g. I believe safe municipal bonds are now returning around 3% after tax. If you want to get more than that you have to buy bonds with a higher risk of default.
I heard California bonds had jumped because of debt/credit problems, and recently mentioned the option of buying such bonds to my parents who asked a similar money management question. They both cracked up laughing. I told them their reaction illustrated why our state had such borrowing problems. I would not have seriously advised getting the bonds but apparently they yielded annualized tax-free 4.7%. (http://latimesblogs.latimes.com/money_co/2009/06/californias-budget-crisis-has-begun-to-rattle-municipal-bond-investors--market-yields-on-the-states-outstanding-genera.html http://latimesblogs.latimes.com/money_co/2009/06/californias...)
- supahfly_remix 17y agoThe interest rate is high because of perceived risk. Just be aware that states have defaulted: http://www.publicbonds.org/public_fin/default.htm http://www.publicbonds.org/public_fin/default.htm The largest default in the history of the municipal bond market was the Washington Public Power Supply System's (WPPSS) default on $2.25 billion in bonds. WPPSS launched a risky program to build five nuclear power plants in the 1970s to supply electricity to the Pacific Northwest. Only one of the five planned nuclear plants was ever completed. The WPPSS fiasco gave a lot more credibility to concerns that tax-exempt bonds were not a completely safe bet.
- aaronblohowiak 17y agoIt is in the california state constitution that bonds be paid first, then payroll, then everything else.
- ncohen 17y agoI wrote the default study referenced in publicbonds.com and was pleased to see the assumptions still hold up. I have started a blog to cover some of these issues again: http://www.thepublicpurse.com http://www.thepublicpurse.com