I just got off the phone with a client and the muni bond issue was front and center. It´s simple. “Credit Risk” in munis can only get worse (and it could indeed get much worse). “Interest rate risk” can only increase as rates eventually rise since they at zero now. Both scenarios push muni bond prices down. I know a lot of you are clipping coupons for 4 and 5 percent which is above the market return for other fixed income, BUT that means the prices are higher now. Bonds have prices just like stocks and “market risk” for those prices is no different than stocks.  They fluctuate.   I know your bond brokers are buddies and they are telling you a different story. I know many of you engaged an almost messianic belief in munis. It´s just time to get honest about the reality of the muni market. It was a prudent play ten years ago. It is not, now.

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