Muni Bond Rally will Continue

Municipal bonds were able to come out a winner after the Fiscal Cliff deal was finalized. Not only did the municipal bonds remain tax exempt, the increase in the top tax bracket is also a bonus for muni bond investors. Here is a breakdown:

• The Fiscal Cliff deal extended the tax exempt status of municipal bonds - POSITIVE FOR MUNIS
• The increase in the top tax rate back to 39.6% (the Clinton era) makes the tax exempt investments ever more attractive for the wealthy - POSITIVE FOR MUNIS
• The more spending by the government will require the Fed to continue to keep interest rates artificially low, thus making the yields on munis the better option - POSITIVE FOR MUNIS

The bottom line is that municipal bonds continue to be a significant part of the portfolio building process at Penn Financial Group. Just over a year ago when Meredith Whitney was calling for the muni bond market to implode - I was on Fox News, Fox Business and quoted in the NY Times and NY Post telling people to buy. I was right and I am once again suggesting you continue to hold onto municipal bonds.

The two ETFs we have owned for years for client of PFG are:

• iShares S&P National Municipal Bond ETF ($MUB)
• Market Vectors Municipal High Yield Bond ETF ($HYD)

For more information on how you can use municipal bonds and other income-producing investments please call the office at 1-877-383-7366.