This week (May 6, 2011 – May 13, 2011) saw more of news about the US government’s deficit battles. Tax-free Mutual funds saw continued outflows. The Muni Market has slowly moved back up, perhaps because of a lack of supply. This may be a good time to adjust your asset allocation. The Week’s municipal bond news included:
- Banks not renewing a state or local government’s letter of credit, was a big concern. 85% were renewed, replaced in the first quarter of 2011, a very good sign. If banks failed to sponsor these letters of credit, a major crisis would possibly occur. $50 billion worth of letters of credit expire in Q2, Q3. (WSJ.com)
- FINRA has an investor alert on municipal bonds. Most of the information has been covered on our site, but is extremely useful for individual investors. (FINRA)
This week (January 21-28, 2011) saw continued media coverage of the Municipal bond crisis. Up week for Vanguard’s VCAIX, VWUIX but more bad news for the municipal bond market dominates the headlines. This weeks municipal bond news included:
- A record $5.7 billion was pulled from municipal bond funds in the week ended January 19, 2011 (Reuters)
- A whopping 56% of bond issuers failed to file financial statements in any given year between 2005 and 2009. (WSJ)
- A financial advisor sees opportunity during this volatile. (Forbes)
- State and local governments us navigate turbulent conditions to maintain credit stability. (S&P)
- A little-known area, banks are making letters of credit for municipalities, a lot harder to get. A concern is whether municipalities may need to satisfy a bank, before it’s bondholders. (WSJ)
Vanguard Municipal Bond Mutual Fund Weekly Price Movement
Vanguard tax-exempt California Money Market fund (VCTXX) is yielding 0.13% – Up 0.01% for the week.
Vanguard Short Term Tax-Exempt Fund (VWSTX) 0.0% for the week.
Month to date: -0.0%. December 2010 -0.14%. Current Yield 0.85%.
Average maturity 1.3 years – Average Duration: 1.2 Years – Average Credit quality: AA. Exp Ratio: 0.20%, 0.12% Admiral shares. Morningstar Rating: 3 Star
Vanguard Limited Term Tax-Exempt Fund (VMLTX) 0.0% for the week.
Month to date: -0.20%. December 2010 -0.43%. Current Yield 1.49%.
Average maturity 2.7 years – Average Duration: 2.4 Years – Average Credit quality: AA. Exp Ratio: 0.20%, 0.12% Admiral shares. Morningstar Rating: 4 Star
Vanguard Intermediate Term Tax-Exempt Fund (VWIUX) 0.30% for the week. Month to date: -1%. December -1.53%. Current Yield 3.41%.
Average maturity 6.7 years. Average duration 5.8 years. Average credit quality AA. Expense ratio 0.20%, 0.12% Admiral shares. Morningstar rating 5 stars.
Vanguard California Intermediate term municipal bond fund (VCAIX) 0.37% for the week. Month to date: -1.1%. December -1.69%. Current Yield 3.6%.
Average maturity 6.3 years. Average duration 5.8 years. Average credit quality A. Expense ratio 0.20%, 0.12% Admiral shares. Morningstar rating 4 stars.
Fidelity Municipal Bond Mutual Fund Weekly Price Movement
Fidelity Short-Intermediate Muni Income Bond Fund (FSTFX) 0.0% for the week.
Month to date: -0.37%. December 2010 -0.63%. Current Yield 1.71%.
Average maturity 3.4 years – Average Duration: 2.7 Years – Average Credit quality: A. Exp Ratio: 0.50% Morningstar Rating: 4 Star
Fidelity California Intermediate term municipal bond fund (FCSTX) 0.0% for the week.
Month to date: -0.37%. December 2010 -0.64%. Current Yield 1.81%.
Average maturity 3.3 years. Average duration 3.1 years. Average credit quality A. Expense ratio 0.35%. Morningstar rating 4 stars.
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 month on this graph: