Municipal Bond Values Surge

After a short three weeks and in an increasingly dire economy, municipal bonds have already proven to be the trade of 2009.

My municipal bonds were trading at 80 to 85 cents on the dollar at the beginning of the year.  Now,  just 2 1/2 weeks later, these bonds are trading just over par, a 20% increase in three weeks!

It seems that the combination of (1) the Democrats talking up a new stumulus package focused on giving money to the municipalities for public works projects, (2) Treasuries trading without any yield, and (3) a stock market that has lost another 1,000 points has sent many rushing into these instruments. 

This has caused an incredible rise in instruments that have never seen this type of return in such a short period of time.  Very unusual.  Actually extraordinary.

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to financial literacy and bank transparency. Since co-founding this website in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

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