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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35387  
Subject: Re: Risks w/ municipal bonds? Date: 5/19/2009 5:07 PM
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I'm looking for an alternative to CDs.
What do you think of GNMAs as opposed to Muni-bonds?


Do you have $25,000 to plop down on GNMAs? Can you get GNMAs with a higher yield than top yields on CDs? Even if you can, do you want to lock in a low yield for a long time? I suspect new issue GNMAs will not have a lot of refinancing, because rates are so low. Refinancing is a problem for GNMAs when rates were relatively high when issued.

If you are in certain tax situations, you may find investment grade munis that pay higher than CDs of the same maturity, but definitely at higher risk. Remember, the idea isn't to have all kinds of different fixed-income/bond assets, but the get the best available return at any given time you have money to invest, adjusted for the level of risk you need to take to reach your financial goals. We may be in a very low interest rate environment, even relative to inflation, but the basic principle still holds.
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