The new tax law has been a boon for muni bonds.
Wholesale changes in the tax code that went into effect in 2018 contained two provisions that have fueled the municipal bond market.
Many households completing their 2018 return became aware of a central change: A household’s federal deduction for state and local taxes (SALT) payments is now limited to ,000 a year. That has its biggest impact in high-tax states like California, New York, New Jersey and Connecticut, where demand for muni bonds has risen.
The tax law also cut back on the supply of muni bonds by eliminating a category known as “advanced refunding issues,” which accounted for around one-fifth of muni bond issues annually.
On top of that, the Federal Reserve decided this year to hit the pause button on further interest rate increases. That lifted all bonds, taxable and nontaxable alike.
But tax-free municipal bonds have been singularly blessed. The Vanguard Intermediate-Term Tax-Exempt bond mutual fund gained 5.1 percent over the 12 months through March. As its name suggests, much of the gain from the tax-exempt fund comes free of federal taxes. That outpaced the 4.1 percent gain for the fully taxable iShares Core U.S. Aggregate Bond E.T.F.
“Over all, it’s an unbeatable risk-reward situation with municipal bonds,” says Terri Spath, who runs the Sierra Tactical Core Income mutual fund, a portfolio that can invest in any pocket of the global bond market and has nearly 20 percent of its assets invested in municipal bonds.
The decline in the supply of new municipal bonds has buoyed bond prices: Only 8 billion in bonds were issued in 2018, compared with 8 billion the previous year. The change in the tax code contributed to that decline. So did a solid economy, which filled government coffers with enough revenue to reduce the need to borrow.
On the demand side, the ,000 limit on SALT deductions has made many households hungrier for tax-exempt income. A recent Treasury report estimated that, if the SALT limit had been in place in 2017, as many as 10.9 million taxpayers would have lost more than 0 billion in federal deductions for that tax year.
Recent fund investments suggest that many people completing their 2018 tax returns in high-tax states have been seeking tax-free solace from muni bonds. This year through the first quarter, net inflows into municipal bond funds and E.T.F.s exceeded billion, compared with billion in the first quarter of 2018.
Kevin Ramundo, co-manager of Fidelity Intermediate Municipal Income fund, says several factors are supporting the outlook for muni bonds in the year ahead: expectations that the bond supply will remain tight, demand will be strong and the Federal Reserve will not raise rates. All that is “going to be very supportive of the asset class, absent an external shock,” he said.
Still, investors need to be careful. The increased popularity of municipal bonds has made them more expensive, and structural issues within the market require deft navigation.
Gary Schatsky, a financial adviser in New York, has plenty of clients who have been stung by the SALT limitation, yet he doesn’t presume that municipal bonds will be a guaranteed salve. The change in the law has reduced tax rates, and that matters. “If your new marginal tax rate is much lower, municipal bonds would arguably be less attractive,” he said.
Here are some issues to consider: The income (yield) from municipal bonds is free from federal taxes, while the income paid on corporate bonds and Treasury bonds is not. Even though municipal bonds typically have a lower nominal yield than taxable bonds, once you factor in taxes, municipal bonds can leave more money in your pocket. But that’s largely dependent on your federal tax bracket.
For instance, a 10-year AAA-rated municipal bond recently yielded 1.9 percent, compared with the 2.4 percent yield on a 10-year Treasury note. For taxpayers paying the highest federal rate — now 37 percent — that 1.9 percent municipal bond yield is equivalent to earning 3 percent on a taxable bond, well above the Treasury yield. Advantage: munis.
But it is different for people in the 22 percent federal tax bracket (which includes married couples filing a joint return with taxable income from ,951 to 8,400). In this case, the 2.4 percent taxable equivalent yield for that muni bond is no better than the yield for a Treasury, and it is below the 3.2 percent yield for the iShares Core U.S. Aggregate Bond E.T.F. Advantage: taxable bonds.
Longer-term munis offer a better value proposition than those with short maturities. Short-term munis have been in such high demand that their yields have dropped to unattractive levels, some analysts say.
“It can make sense to look at other taxable alternatives such as certificates of deposit and Treasuries,” said Cooper Howard, a senior fixed-income analyst at the Schwab Center for Financial Research.
Owning municipal bonds solely from issuers within your own state can be appealing, but here, too, caution is advised. Interest income from in-state munis is exempt from state as well as federal taxes. No doubt, that’s alluring. Yet for many investors, it still makes sense to hold national bond funds, even though they will owe state income tax on the portion of the fund’s income that came from out-of-state sources.
“California and New York are the only two states where we would recommend an in-state portfolio,” Mr. Howard said. Both states have a broad supply of bonds that make it possible to build a diversified portfolio, and they currently are taking in plenty of tax revenue, he added.
Yet prices for these bonds are high; their yields, which move in the opposite direction, are low. For these two states, general obligation bonds — those that rely on tax revenue to pay investors — are fully valued, Mr. Ramundo of Fidelity said. Currently, the Fidelity fund holds less than 10 percent of its assets in California and New York bonds, compared with around 30 percent for two E.T.F.s, iShares National Muni Bond and Vanguard Tax-Exempt Bond, that mirror the broad muni bond market.
Moreover, some strategists say high-tax states like New Jersey and Illinois, which are grappling with underfunded pension and benefit obligations, are unattractive sources of muni bonds. Marilyn Cohen, chief executive of Envision Capital Management, a Los Angeles investment management firm, said she takes on New Jersey and Illinois clients only if they are willing to steer clear of their own states’ bonds.
John Mousseau, chief executive and director of fixed income at Cumberland Advisors in Sarasota, Fla., says a longer-term concern is how states with high income-tax rates might fare if residents moved in large numbers to states with lower, or no, income taxes. One prominent example of the tax-exodus risk occurred in 2016, when David Tepper, a hedge fund billionaire, moved to Florida from New Jersey. That dealt a blow to New Jersey’s budget.
If hordes of mere millionaires catch the bug, Mr. Mousseau said, high-tax states could be in a revenue bind. If that happens, general obligation bonds, which rely on tax collections to pay back investors, will come under greater pressure.
Another market segment, “essential revenue” bonds, for services like water projects and airports, is often considered a safer investment because these bonds are backed by payments from the people who use these crucial services. Ms. Cohen, for example, says O’Hare International Airport revenue bonds are far more attractive than Illinois general obligation bonds. O’Hare, the Chicago airport, plays such a crucial role in the nation’s air infrastructure that its revenue stream is relatively secure, she said. She says the O’Hare bonds are the one Illinois-based issue she considers for clients.
“When I started in the ’70s and ’80s, general obligation bonds were the gold standard,” Ms. Cohen said. “No more.” Today, she said, “Essential revenue bonds are the better option.”B:
今晚六会彩开奖特号码手机看开奖【威】【振】【天】【目】【光】【冰】【冷】【的】【注】【视】【着】【主】【裁】【判】，【主】【裁】【判】【则】【指】【了】【下】【手】【捥】【中】【的】【计】【时】【器】，【示】【意】【比】【赛】【时】【间】【己】【到】。 【威】【振】【天】【抬】【起】【右】【手】，【向】【他】【申】【出】【了】【食】【指】，【指】【向】【了】【他】，【然】【后】【向】【他】【摇】【了】【摇】，【意】【思】【是】，【作】【为】【主】【裁】【判】【的】【你】，【不】【行】！ 【这】【一】【刻】，【所】【有】【人】【都】【目】【噔】【口】【呆】，【就】【连】【在】【场】【边】【骂】【咧】【咧】【的】【老】【帅】【都】【呆】【住】【了】。 【这】【时】【主】【裁】【判】【的】【哨】【声】【再】【次】【响】【起】，【他】【跑】【向】【威】【振】【天】
【天】【阴】【沉】【沉】【的】，【伍】【胥】【坐】【在】【办】【公】【室】【里】，【撩】【开】【轻】【薄】【的】【白】【纱】【窗】【帘】，【抻】【长】【脖】【子】【向】【外】【看】【了】【看】。 【既】【然】【没】【有】【了】【太】【阳】，【干】【脆】【把】【窗】【帘】【拉】【开】。【平】【时】【他】【更】【喜】【欢】【阴】【暗】【的】【环】【境】，【因】【为】【那】【样】【他】【才】【能】【更】【好】【的】【工】【作】。【在】【一】【个】【封】【闭】【而】【安】【静】【的】【环】【境】【里】，【他】【觉】【得】【自】【己】【更】【接】【近】【达】【芬】【奇】。 【可】【当】【拉】【开】【窗】【帘】【的】【时】【候】，【很】【多】【东】【西】【都】【会】【分】【散】【他】【的】【注】【意】【力】，【比】【如】【对】【面】【马】【路】【上】【的】
【桑】【子】【明】【先】【做】【的】【第】【一】【件】【事】，【是】【将】【爷】【爷】【桑】【长】【和】【神】【医】【扁】【鹊】【请】【过】【来】。 【他】【还】【想】【去】【请】【神】【医】【歧】【伯】，【然】【而】【他】【派】【出】【的】【分】【身】，【被】【人】【皇】【轩】【辕】【挡】【住】【了】。 【歧】【伯】【是】【人】【皇】【的】【属】【下】，【人】【皇】【在】【众】【帝】【台】【受】【辱】，【因】【此】【心】【中】【不】【忿】，【不】【想】【放】【歧】【伯】【出】【来】，【帮】【桑】【子】【明】【做】【事】。 【天】【下】【三】【大】【神】【医】【只】【来】【了】【两】【位】，【桑】【子】【明】【感】【到】【有】【些】【遗】【憾】。 【他】【对】【爷】【爷】【和】【扁】【鹊】【道】：“【许】【久】【以】
“【起】【床】【了】？”【李】【行】【的】【声】【音】【气】【定】【神】【闲】【的】，【看】【来】【对】【他】【来】【说】【这】【不】【算】【什】【么】【大】【事】【儿】。 “【我】【什】【么】【时】【候】【睡】【过】【懒】【觉】？” “【也】【是】，【我】【最】【喜】【欢】【你】【的】【一】【点】【就】【是】【自】【律】，【对】【于】【一】【个】【艺】【人】【来】【说】，【这】【是】【迈】【向】【成】【功】【必】【备】【的】【品】【质】。 【对】【方】【喝】【了】【口】【茶】，【润】【了】【润】【嗓】【子】【继】【续】【说】【道】：“【网】【上】【的】【事】【情】【知】【道】【了】【吧】？” “【很】【荣】【幸】，【能】【跟】【顶】【流】【传】【绯】【闻】，【这】【阵】【仗】【果】【然】今晚六会彩开奖特号码手机看开奖【不】【久】【前】，【七】【层】【天】【堂】【山】【也】【终】【于】【开】【完】【了】【战】【前】【会】【议】，【正】【式】【朝】【深】【渊】【发】【起】【了】【总】【攻】。 【每】【隔】【一】【段】【时】【间】，【天】【空】【中】【便】【会】【出】【现】【一】【片】【天】【界】【之】【门】，【爱】【剌】【天】【族】【已】【经】【举】【族】【出】【动】，【只】【留】【下】【莫】【维】【尔】【女】【王】【一】【人】【独】【自】【看】【守】【大】【本】【营】。 【亚】【空】【天】【族】【作】【为】【先】【锋】【已】【经】【登】【录】【了】【不】【少】【位】【面】，【本】【已】【被】【恶】【魔】【扳】【回】【了】【一】【些】【的】【局】【面】，【顿】【时】【又】【变】【成】【了】【一】【面】【倒】【的】【屠】【杀】。 【大】【量】【深】【渊】【位】
【黄】【百】【惠】【问】【我】【道】：“【你】【结】【婚】【了】【没】【有】？” 【我】【摇】【着】【头】【说】：“【还】【没】【有】，【不】【过】【快】【了】？【你】【呢】？” 【黄】【百】【蕙】【点】【了】【点】【头】【说】：“【结】【了】，【小】【孩】【都】【一】【岁】【了】。” 【我】【看】【了】【看】【她】【说】：“【你】【结】【婚】【这】【么】【早】【啊】？” 【黄】【百】【蕙】【有】【点】【不】【好】【意】【思】【地】【说】：“【不】【早】【了】，【我】【今】【天】【三】【十】【了】，【同】【龄】【人】【中】，【我】【算】【结】【婚】【得】【晚】。” 【我】【嗯】【了】【一】【声】【说】：“【是】【有】【点】【晚】，【不】【过】，