It has definitely been an improving year for the Miami municipal bonds. It was bout in declining trend six months ago, but the bond’s market price rose gradually during the summer. Now, the same situation going to be appeared in the future bond market again. Wall Street has focused on “munis” after the decision of President Obama who revealed his $447 billion jobs billion the USA.
Put into that job stimulus proposal was to initiate a provision to limit the benefits of tax-exempt in US municipal bonds for individuals who are earning about $200,000 about $250,000 for married couple that should be in joint income. The proposal addresses that the investors who are bounded in higher tax brackets of about 28 percent or more than that, those would specially face a “cap” on the price of their municipal bond income, which is implemented from 2012 and lose a portion of their current benefits.
However, a report says that Obama’s proposal would create conflicts in Congress, due to the Republicans, who were ready to oppose any type of decision regarding tax increment or economic fluctuation programs. But, the potentiality of tax-exempt interest cover has made affected the municipal bond market in Miami. Definitely, if the President’s proposal were about to formulate as tax law, It would affect the entire US bond.
Is Wall Street overreacting?
From our private view, it can be believed that Wall Street will be is overreacting once again to reduce the market fear and potential bad news. In case of some investors, it can make sense of selling a part of their municipal bonds in portfolio basis so that it can reduce the possibility of higher profit which is about to affect the Miami bond market. On the other hand, it may be an ideal time to purchase bonds for some of the bond investors.
However, the recent proposal by John Dillon addresses that the municipal bonds of Morgan Stanley Smith Barney and Chief Municipal Bond which yields according to “AAA” which were traded below the par value. That made investors easy to buy high-quality tax-exempt bonds at comparatively bargaining prices.
Moreover, the municipal bond’s yields rate is currently higher as compared to other financial instruments like U.S. Treasuries of the same trading duration, which was the benchmark for financial securities investors. That is why; some of the conservative investors go to obtain a high amount of return from these municipal bonds as per their investment portfolio of some other financial securities like T-Bills, commercial paper, CDs and so on.