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February 25 – March 4, 2011 Municipal Bond and Mutual Funds News – More collective-bargaining protests

municipal bonds

This week (February 25, 2011 – March 4, 2011) saw lots of news about Wisconsin protests spreading to other states. The mutual funds we track were mostly up slightly this week and for the month, fund yields fell slightly. Longer duration mutual funds, both much more than shorter duration mutual funds. This weeks municipal bond news included:

  • Part of the reason why states are in so much trouble is because of unduly rosy revenue forecasts. In 2009, income forecast by all 50 states exceeded reality by more than $49 billion. States spent as if the money came in anyway. Someone should have be fired! (WSJ)
  • A consulting firm founded by economist Nouriel Roubiniis predicting close to $100 billion of municipal bond defaults over the next 5 years, causing $35 billion of losses over several years. Most defaults will occur among special government projects and revenue dish generating entities that are considered viable. Defaults will be restricted to unrated issues and junk-rated revenue, they stated, so start selling these dangerous issues that you should not have in the first place! (Bloomberg)
  • Boise County, Idaho filed for bankruptcy on March 2, 2011 due to inability to pay multimillion dollar judgment against it. This is not home to the city, Boise.
  • A calm period after a stormy period for municipal bonds. They list two defining moments in November 2010 that help drive yields up and prices down;
    – Republicans winning the house along with control of several governorships and state level chambers – leading to less likelihood of additional federal support for troubled states and governments.
    – S&P downgrading the large number of tobacco bonds to junk status. (WSJ)
  • Why muni bond crisis may be exaggerated. (CNBC)

Vanguard Municipal Bond Mutual Fund Weekly Price Movement (Detailed stats)

Vanguard tax-exempt Money Market fund (VMSXX) is yielding 0.13%, +0.00% for the week.

Vanguard Short Term Tax-Exempt Fund (VWSTX) +0.0% for the week.
Month to date: +0.06%. December 2010 -0.14%. Current Yield 0.83%.

Vanguard Limited Term Tax-Exempt Fund (VMLTX) +0.0% for the week.
Month to date: +0.27%. December 2010 -0.43%. Current Yield 1.47%.

Vanguard Intermediate Term Tax-Exempt Fund (VWIUX) +0.07% for the week. Month to date: +1.07%. December -1.53%. Current Yield 3.36%.

Vanguard California Intermediate term municipal bond fund (VCAIX) +0.0% for the week. Month to date: +1.3%. December -1.69%. Current Yield 3.57%.

Fidelity Municipal Bond Mutual Fund Weekly Price Movement (Detailed stats)

Fidelity Short-Intermediate Muni Income Bond Fund (FSTFX) +0.0% for the week.
Month to date: +0.09%. December 2010 -0.63%. Current Yield 1.8%.

Fidelity California Intermediate term municipal bond fund (FCSTX) +0.09% for the week.
Month to date: +0.28%. December 2010 -0.64%. Current Yield 1.87%.

See how the Fidelity intermediate term municipal bond fund (FCSTX) and Vanguard California intermediate term municipal bond fund (VCAIX) performed this week on this graph:

See how the municipal bond mutual funds we listed above performed this year on this graph:

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