Can I Buy Municipal Bonds Directly

Can I Buy Municipal Bonds Directly – If you own municipal bonds, you know very well that they had a tough year as the Federal Reserve raised interest rates significantly. Rising interest rates affect bond prices, including muni bonds; This causes many investors to sell, which puts pressure on bond prices.

But now it gets interesting. As rates fell, muni bond yields hit their highest level in more than a decade. They are currently higher than most other bond yields and are close to the average annual return for the long term.

Can I Buy Municipal Bonds Directly

Additionally, high-yield bonds require investors to accept high risk, but many municipalities are currently in a very strong financial position, which should mean relatively little risk.

Investing Close To Home: The Basics Of Municipal Bonds

The Bloomberg Municipal Bond Index is down 12.5 percent this year through Nov. 7, one of its worst years in history. But his return increased from 1% to about 4%.

More importantly, the tax-equivalent yield (the rate at which taxable bonds yield the same as tax-free muni bonds) rose to 7%, the highest rate in more than a decade.

That means Muni bonds outperform the 4% yield on Treasuries and the 6% yield on the JULI investment-grade corporate index. They have outperformed the S&P 500 index since 2000 with an annual return of nearly 6.5%.

You usually have to take more risk to get higher returns. For example, the only major U.S. asset class is higher yield than muni bonds are high yield, and the issuers are rated below investment grade because they have a higher risk of default.

Opportunities Come Knocking In The Muni Market

But here’s the good news: Muni bonds not only offer high yields, but they’re also a high-quality asset class. About 85 percent of the market is rated A or higher.

And the current base is in very good condition. The city’s revenue, boosted by the federal budget and fiscal policy support during the pandemic, has risen dramatically over the past two years.

One result is that many state and local governments have been able to shore up their “rainy day” funds to provide tax credits, pay down debt or top up pensions.

In 2022, the public finance system remains funded and will benefit from federally funded assistance, including the Coronavirus Relief, Relief, and Economic Security Act (CARES) and the American Rescue Plan Act (ARPA), among others.

The Basics Of Municipal Bonds — Vision Retirement

At the same time, housing prices and wages have continued to rise, which has taken away property taxes and wages from municipalities. In the 40 states that provided tax data at the end of July, tax revenue rose 18.2 percent this year.

This incredibly strong financial position means that most bond issuers are unlikely to fail even if the economy collapses and city revenues fall.

Source: Personal State Monthly Tax Report, J.P. Morgan. Data as of September 7, 2022. Note: Oregon, Wyoming, and Alaska do not provide monthly tax data. Gray bars indicate that data for July is not yet available and is being adjusted for the year. The Index is not an investment product and cannot be considered an investment. Past performance is no guarantee of future results.

The graph shows the year-over-year change in tax revenue for 2022 compared to 2021. YTD revenue is up at least 10% in most states.

Buying Municipal Bonds For Retirement? Beware This Pitfall.

Although interest rate volatility will remain high in the short term, high yield muni bonds provide a good hedge against price volatility if interest rates continue to rise.

Muni bonds can be useful in passive portfolios: If the economy goes into recession and interest rates fall, the price of a muni bond will rise (the opposite of what happens) – which may increase the total return of a muni bond to some extent. times when the return on equity may be low.

We believe that muni bonds offer exceptional value to investors who want to extend the duration of their fixed income portfolios and maintain high returns over many years. Investors have options to exercise.

Your J.P. Morgan team can help you explore which municipal bond opportunities can help you achieve your long-term goals. You can learn more about investing in fixed income here.

Municipal Bonds Increasingly Held By Funds Instead Of Individuals

CH₄, HR4346 and mRNA-1273 Acknowledgments List of Acknowledgments. My list this year: CH₄, HR4346 and mRNA-1273.

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Investors should understand the potential tax liability associated with purchasing municipal bonds. Holders are subject to a separate minimum tax, while some municipal bonds are subject to federal tax. Capital gains, if any, are subject to federal tax. Investors should be aware that income from tax-exempt municipal bond funds may be subject to state and local taxes and the Alternative Minimum Tax (AMT).

Municipal Bonds In India

The Bloomberg Municipal Bond Index covers the long-term tax-exempt bond market denominated in US dollars. The index has four main categories: state and local general obligation bonds, revenue bonds, insurance bonds and prepaid bonds.

The JPM Investment Grade Index (JULI) provides ratings and performance estimates for a well-defined universe of investment grade corporate bonds, tracking individual issuers, sectors and subsectors across a range of ratings and maturities.

The Standard and Poor’s 500 index is a capitalization-weighted index of 500 stocks. The index is designed to measure the performance of the domestic economy through changes in the total market capitalization of 500 stocks representing all major sectors. The index is made for the base period 1941-1943 with a base rate of 10.

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Rewarding Reasons To Invest In Municipal Bonds

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