Investors have recently sold off municipal bonds and there could be more selling on the way. On yesterday’s U.S. television news magazine “60 Minutes”, reporter Steve Kroft lead a segment that focused on the growing financial woes of state and local governments.
Pimco recently announced that it will postpone monthly dividend payments for 6 municipal closed-end funds.
Municipal bond prices had been hurt by concerns over mounting government budget deficits, declining tax revenue and sales by money managers to meet redemption requests.
With the city of Harrisburg, PA on the verge of bankruptcy and other cities and states in financial trouble, investors should be revisiting the role of tax-exempt bonds in their portfolios. ETFs offer investing possibilities to investors seeking tax-exempt income without the risk of exposure to a single municipality or state.