Municipal Bonds Aren't All That Safe

If you’re looking for day trading tips, here’s one: municipal bonds aren’t as safe as they once were. When Las Vegas planned a monorail system that would allow tourists to easily travel up and down the strip, it seemed like a pretty good idea. And after selling more than $600 million in bonds, with some paying up to 7.5% annually, why not?

But when the tourists stopped flocking, and the project filed for bankruptcy earlier this year, it seemed as though investors were dreaming. Since when does such a highly rated muni bond fail so badly? Since last July municipal bond investors have missed, on average, about one interest payment daily, for a grand total of about $6 billion dollars. Simply put, what was once a low risk market, now looks pretty risky. Even the insurance that grounded a lot of these investments now seems unsteady, because the insurance companies themselves have been implicated in recessional woes.

A default isn’t necessary for a drop in the value of municipal bonds; that has already occurred. Holding bonds until they mature won’t mean lost capital, but if you need to sell it immediately, it may. So if you have municipal bonds, wait for them to mature, because falling bond prices are not a good sign for small time investors, who rely on day trading tips. For more day trading training visit www.TrademarkAcademy.com.