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Old December 5th, 2011, 08:17 AM
pogostick pogostick is offline
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Default Bonds

Is this a good time to buy municipal bonds?
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Old December 5th, 2011, 02:38 PM
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Coyote Coyote is offline
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Deffinitely depends on which municipality! I might stay clear of Detroit Municipal Bonds.
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Old December 5th, 2011, 05:30 PM
moo321 moo321 is offline
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No. I don't think it's a good time to buy any bonds. POSSIBLY distressed bonds, but then you're taking significant capital risk with something that still may barely have a double digit yield to maturity. Why not take your capital risk on a distressed stock which will have more upside?

IF you were to buy distressed bonds, I would want to know that you did solid financial analysis from a debt perspective. This is VERY different from analysis of a stock, which focuses on things like earnings, growth, dividends, etc.

You would want to analyze cash flows, balance sheets, liquidity, etc. Make sure they will be able to repay the bond.

However, the MAIN reason not to buy bonds is that we have 0% interest rates from the Fed. Bonds gain value when interest rates go down, and they can only go up. So, bonds can only lose money due to interest rate risk.

If you want something safer, I'd recommend reward checking accounts, many paying 2-4%. If you want a good yield, and are willing to take on some capital risk, I'd recommend utility stocks: many have dividend yields greater than bonds.
 

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