Thursday, November 18, 2010

Municipal Bond Mess

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Anyone paying attention to the Ishares National Municipal Bond ETF (MUB)? As far a bonds go, this type of move is extraordinary. Should this problem spread and infects the treasury market, it could reach the point where interest rates are rising in lockstep with the dollar. If the dollar continues to rise, it would place additional pressure on stocks, commodities, and bonds. For most retail investors, there will be no place to hide.

Historically, the US experienced very few municipal defaults -- around a tenth of 1 percent over the last 40 years, and hence has been thought of as a safe place to invest. But that $2.8 trillion market is becoming more and more vulnerable. >>READ MORE

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