Munis and the Potential Benefits of Crossing State Lines

Daniel Marques, Portfolio Manager for Standish, recently outlined the potential merits of municipal bond investors diversifying beyond their home states: lower portfolio volatility, improved credit diversification, enhanced liquidity and potentially higher after-tax yield and total return. The article includes a graph of the difference in portfolio volatility between a nationally diversified portfolio and a Colorado-only tax-free portfolio.  

However, Marques also points out that exposure to the Alterative Minimum Tax (AMT) should be carefully considered when evaluating the merits of national diversification. Click here for insights on the municipal bond market, including the rebound in state tax revenues.  

Scott Middleton