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Puerto Rico Got Away With It

These bonds are CUSIP 74514LE86. The bonds are Puerto Rico Commonwealth Series A maturing July 1, 2035. Take a deep breath. Those are 20 year bonds. The Commonwealth unloaded $3.5 billion of these with a hefty 8 percent coupon according to EMMA. But, as we all know, a bond is nothing more than a promise to make one or more future payments on specified dates. The quality of that promise is reflected in the yield to maturity, not the coupon yield. Continue Reading →

Paul Ryan’s Budget Proposal

So, Rep. Ryan, I ask a simple question: what do you propose to do about municipal bond interest? If that interest remains tax exempt, your proposal will cause wealth to flood into the muni market, driving interest rates being paid by state and local governments down sharply. The portfolio shift will be caused by — what else? — wealthy people trying to escape taxes. Continue Reading →