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Why It's Time for Muni Bonds

stick with UTGO (unlimited tax general obligation) bonds issued by school districts -- perhaps stay out of FL, MI, OH, CA... the Texas school system uses a Fund to enhance the credit - the Permanent School Fund, or PSF - that's probabaly the best credit in the world - no exaggeration. The fund is bigger than the notional amount outstanding of bonds it "insures"... what's more, no TX schoold system has ever had to lean on the PSF for help... school bonds are about as safe as they come...

By buying smaller school districts you are also staying away from larger issuers that have been implementing swaps and derivatives that are coming back to burn them (eg Orange Co CA in the 90s and Jefferson AL today)

As far as imminent defaults per RJK's post, I agree that's an issue that should be addressed. However, Gen. Obl. and Essential Purpose Revenue bonds (ie Water/Sewer) are as safe as they get -- it's hardly a stretch to say that they never default. and if they do, they are usually eligible for aid to keep the cashflows coming while they righten themselves... a municipality can't just declare bankruptcy and close shop like a company can... they need the market for future borrowing so they will act accordingly.

investinginbonds.com answers a lot of questions.
Sep 25 15:41 pm |Rating: 0 0 |Link to Comment |View article

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Why It's Time for Muni Bonds

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