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Municipal-bond investors face a conundrum. The spike in interest rates since the election has made long-term tax-exempt bonds more attractive than they’ve been in years. You can now buy highly rated 10-year munis yielding near 3%—more than Treasuries and high-quality corporate bonds. That’s equivalent to a 4% taxable yield for investors in a high tax bracket.
Yet higher interest rates are a two-edged sword. At the same time, muni prices are falling. As of Friday, the benchmark-tracking iShares National Muni Bond exchange-traded fund (ticker: MUB) had a negative 1% year-to-date return. (At the end of October, it had been up 2.3%.) For investors who bought muni funds this year, harvesting tax losses makes sense. Bond-fund outflows, which began in the past two weeks, are likely to pick up into December.
Regards,
Ted
https://www.google.com/#q=Municipal+Bonds:+What+to+Do+as+Prices+Drop+Barron's
