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Follower ○○

Municipal Bonds Risk

Hi all,

I hold around 30 k of PRFHX T. ROWE PRICE TAX-FREE HIGH YIELD.

I was surprised today to find out that it's down a 12% since I invested a few months ago

My understanding is that a municipal bond is a issued by a state, county or municipality. In my mind is highly unlikely (almost impossible) that these bonds don't get paid back, in the end the US central bank has the ability to print money and I don't believe they would let these entities go bancaruptcy.

I guess, in a nutshell, I don't understand why this fund went down so much if it's return is pretty much guaranteed in my mind.

Thanks

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2 Replies
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Valued Contributor

Re: Municipal Bonds Risk

Municipal bonds are not the responsibility of the federal government.

Several municipalities have declared bankruptcy.

Muni bonds are rated and muni HY have lower ratings.

Compare with ETF HYD. Much of the damage is just in March.   https://stockcharts.com/h-sc/ui?s=HYD&p=D&yr=0&mn=6&dy=0&id=p46926485837

YBB
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Contributor ○○

Re: Municipal Bonds Risk

High yield bond funds vary directly proportional to the stock market. In most cases. they are positively correlated.

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