I suppose that sometimes being lucky is better than being good. I think we’re now seeing the shock to muni bonds that I was expecting, just didn’t expect it this quickly! High yield muni bonds look like someone pushed them off a “fiscal cliff,” falling 4.5% the past 3 days trading days alone. That’s an entire year of interest wiped out… in 3 days! I’ve already started to repurchase in the usual fashion of scaling-in in pieces. The more we continue to slide, the more I’ll buy. I buy in pieces rather than all at once because the hard part is knowing where the bottom will be. Some sell-offs can really start to snowball, especially with high yield bonds, because liquidity dries up when no buyers are willing to step in and take on the higher credit risk in the face of deteriorating fundamentals. For example, the last sell-off that occurred two years ago saw a slide of more than 11%. This illustrates the importance of managing volatility within bonds. It’s not as simple as “It’s a bond fund, so it’s safe – I’ll just buy some bonds.” As I said a few weeks ago, the time to buy municipal bonds was a year ago, not immediately after President Obama’s reelection. Our opportunity to get in is now upon us.
Nick
High Yield Muni Bond ETF – 6 months
National Intermediate Muni Bond ETF – 6 months
