Financial Issues - Think Biblically about your finances.

Fri, 5/29/2015

More States Issuing Municipal Bonds

 

. . . but the bonds have taken on a new look.

 

 

This year promises to be another banner year for municipal bond issues. We went many years with few municipal bonds being issued. They became harder and harder to get . . . but now they are becoming a bit more attainable if you are interested in tax-free income.

 

However, there is a problem. In the past, local governments sold municipal bonds to fund projects like bridges, schools, hospitals, sewage treatment, and water plants. In other words, there were hard assets backing the sale of the bonds. Not anymore.

 

Most municipal bonds being issued seem to be just refinancing the current debt of these states at cheaper levels. The municipal bonds being issued this year are 60 percent above the same period last year according to data from Securities Industry and Financial Markets Association (SIFMA). But SIFMA's information also makes it clear that capital has fallen 4 percent compared with last year, whereas year-to-date financing volume is up 122 percent. Most of the bonds being issued this year have been used primarily to finance debt. Buying a municipal bond these days offers the same tax benefit as before, but there is no asset backing it up. The only thing backing it up is more debt from a particular state or a municipality within the state.

 

States are jumping on the opportunity to refinance their debt. You could say, "Yes, but the underlying debt involved is still in a hard asset." That would be true except for this: the refinance often includes a higher value (based on what they say isappreciation) of the underlying asset than when it was issued.

 

Are you wondering why we are not seeing road construction and potholes being fixed and new highways being completed? Simply because the states have no money. They have so much debt to pay off that they cannot afford to issue bonds that will finance projects worthwhile for the people of that state. If they sold bonds for those needed projects, along with issuing bonds to finance their debt, they would probably fail to get both financed. They have to pick one or the other . . . and their priority is to help finance current debt-not paying off debt but restructuring it while creating a bit more debt on the asset they originally financed.  

 

Yes, municipal bonds still offer the great tax benefits, but remember . . . they are not the same kind of municipal bonds being sold just five years ago.  


 

Financial Issues with Dan Celia

Fri, 5/29/2015
» More States Issuing Municipal Bonds
Fri, 5/22/2015
New Retirement Trend
Fri, 5/15/2015
U.S. Debt
Fri, 5/8/2015
How to File on Your Ex's Social Security
Fri, 5/1/2015
The Economy Crawls Along
Fri, 4/24/2015
International Monetary Fund
Fri, 4/17/2015
Government Pensions
Fri, 4/10/2015
The Economy
Fri, 3/20/2015
Who is Buying the Stock Market?
Fri, 3/6/2015
The Timothy Israel Fund
Fri, 2/27/2015
Fed Up with the Federal Reserve
Fri, 2/27/2015
Inflation/Deflation
Fri, 2/20/2015
Blaming A Strong Dollar
Fri, 1/16/2015
Preparing for Economic Armageddon
Fri, 1/9/2015
One Emergency Away From Trouble
Fri, 12/12/2014
U.S. and the Global Economy
Fri, 10/17/2014
Bonds or Stocks?
Fri, 8/29/2014
Social Security Gone Broke?
Thu, 8/14/2014
Inflation is Too Low
Fri, 7/18/2014
The Pending Pension Crisis
Fri, 6/27/2014
Exporting Jobs
Fri, 6/27/2014
Exporting Jobs
Fri, 2/28/2014
The GDP Deception
Fri, 2/14/2014
Return Of...or...Return On
Wed, 9/11/2013
Retiring? Shift Your Mind Set
Sat, 3/30/2013
2013 Economy Trending Upward, Reminiscent of 1996?
Thu, 11/29/2012
ReRun (6/4/10): Social Control, Sharing the Wealth, and More Government
Thu, 6/14/2012
Emergency Preparedness 2012
Tue, 3/22/2011
WSJ 3/8/2011 ~ Making the Case to Buy An Annuity
Fri, 3/18/2011
Preparedness
Fri, 2/25/2011
My 1/18/10 article, "Reset Button," with revisions as of 2011
Fri, 1/7/2011
Commodities, Food and Inflation

Get this news delivered
directly to your email...

AFA Journal

Privacy Policy | Return Policy | Delivery Policy | Terms & Conditions | Membership Web Designs by Full Blown Studio

Financial Issues Stewardship Ministries is not responsible for any loss, injury, claim, liability, or damage related
to your use of this site or any site linked to this site, whether from errors or omissions in the content of our site or
any other linked sites, from the site being down or from any other use of the site. In short, your use of the site is at your own risk.

©2009-2010 Financial Issues Stewardship Ministries - All Rights Reserved