Municipals Rock On

If there’s something negative to be said about muni bonds, I’ve heard it. And I’m still not buying this fear and loathing.

Small city hall government building
(Image credit: Travis Owenby)

As a 5.5% return through mid July confirms, America’s municipal bonds are built of titanium. This isn’t the first time I’ve said this. In previous columns, I have emphatically urged everyone to carry on holding and accumulating state and local bonds. And that’s despite overamplified warnings that have persisted since almost a decade ago, when an irresponsible but famous analyst wrongly prophesied a flood of defaults and bankruptcies.

Today’s prognostications aren’t as apocalyptic, but they are every bit as misguided. Let’s start with last year’s fulminations that high-bracket income tax cuts would render tax-free interest income less attractive. False. It turns out that people prefer to pay zero taxes on investment income rather than earning a few pennies more of after-tax interest.

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Jeffrey R. Kosnett
Senior Editor, Kiplinger's Personal Finance
Kosnett is the editor of Kiplinger's Investing for Income and writes the "Cash in Hand" column for Kiplinger's Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.