Tuesday, May 25, 2010

Municipal Bonds In Trouble? Increasingly, Yes

Municipal bonds are usually very, very solid. If a town defaults on on a muni issue it is a huge black eye for the community. There are differences in quality of course. Some towns are more credit worthy than others and this is typically reflected in the bond yield. Higher the yield, the less credit worthy the municipality. But generally speaking munis have been a great way to generate tax free income.

For those who don't know you don't have to pay federal or state taxes on muni bonds. (So long as you buy bonds issued in your home state.) If these instruments are starting to crack on a broad scale that is not good.

Municipal Bonds: Derailed (Click here for the story)

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Nick Sorrentino is the Editor of The Liberty and Economics Review and CEO of Exelorix.com a social media management company.