Thursday, November 18, 2010

Uh-oh

Municipal bond prices have been plummeting for the past couple of weeks.


Municipal bonds are the vehicles that states, counties and cities use to borrow money. When bond prices fall, it becomes more expensive for local governments to raise cash because they have to sell more bonds (and promise bigger future payments) to borrow the same fixed amount of money.

2 comments:

Keith Wilson said...

Great graph and good information.
How are we to interpret this?

Does this mean that the cities will sell bonds that are cheap to buy now, but will be worth more in the future for the buyer?

Is this a good thing for the investor, but a bad thing for the cities and institutions selling bonds?

Jody Wilson said...

I think it's one more straw on the economic camel's back. As you know I'm simply looking for the right time to buy a large stake in bear funds, and states running out of money sounds pretty bearish to me.