The Money Farm Team

The prospect of rising short-term yields is one of the key hazards connected with municipal bonds. This means that new bonds will pay a greater interest rate to bondholders, and your bond will be perceived as less valuable. This may result in a decrease in the value of your bond. Only if you decide to […]

Some economists predict a reduction in muni demand this year due to a predicted slowing in household savings, which grew during the pandemic, particularly among the wealthy. The demand for tax-exempt debt has long outstripped annual issuance. Is it wise to invest in municipal bonds in 2022? The key drivers of the municipal market are

The most compelling economic argument for municipal bond tax exemption is that it encourages state and local governments to invest in infrastructure projects that benefit nonresidents. Why are municipal bonds exempt from taxation? Federal Taxes and Municipal Bonds Because the federal government does not tax most state and local government activities, most muni bonds are

A longer time period has a higher possibility of interest rates rising (and consequently negatively affecting the market price of a bond) than a shorter time period. As a result, investors who purchase long-term bonds and then try to sell them before they mature may find themselves with a significantly depressed market price. This risk

Municipal bonds pay lower interest rates than taxable bonds because they create tax-free income. The higher yield provided from taxable bonds may be better suited to investors who anticipate a big decline in their marginal income-tax rate. Why are municipal bonds appealing to retail investors? Why would Schwab advise you to invest in municipal bonds?

While no one can anticipate where interest rates will go in the future, looking at the “duration” of each bond, bond fund, or bond ETF you buy can give you a good idea of how sensitive your fixed income holdings are to interest rate changes. Duration is used by investment experts because it combines various

The fundamental explanation for this inverse association is that bonds, particularly US Treasury bonds, are regarded a safe haven, making them more appealing to investors in such times than volatile stocks. In addition, as part of monetary policy that boosts the economy by decreasing interest rates, the Federal Reserve frequently purchases US Treasury bonds to

Junk bonds are those that have a higher chance of default than most corporate and government bonds. A bond is a debt or commitment to pay interest and return invested principle to investors in exchange for purchasing the bond. Junk bonds are bonds issued by corporations that are experiencing financial difficulties and are at a

Reuters, 2 December – In November, high-yield bond funds in the United States suffered their largest withdrawals in eight months, owing to the possibility of the Federal Reserve hiking interest rates sooner than expected, as well as, to some extent, fears about the Omicron coronavirus variety. Why are the yields on junk bonds so low?

A junk bond is a debt that has received a poor credit rating from a rating agency and is considered below investment grade. As a result, these bonds are riskier because the likelihood of the issuer defaulting or experiencing a credit event is greater. Investors are paid with higher interest rates as a result of