I've highlighted MUB several times in the last month or so. MUB is an ETF covering national municipal bonds. With government aid to states set to expire mid-year and the housing crisis and demand for extended state benefits for the unemployed, the funds for state and local governments are still very under capitalized.
The recent trend in dumping municipal bonds is getting worse and the S&P rating service announced they expect to downgrade more municipalities this year. As investors pour out of these funds, the yields rise which makes repaying the debt obligations a heavier burden as well as issuing new debt obligations. It's a catch 22, the states need help now more then ever, and they are facing higher costs pushing them closer and closer to default.
MUB is one investment vehicle to play this trend on a short trade.
Daily chart of MUB
Daily 3C chart of MUB with a negative divergence at the top.
The green arrow shows the trend channel holding the uptrend for 3 months, and thus far it's held the downtrend for 3 months. The current stop is about $99.49 and MUB is rallying today, the closer you can enter MUB on a short trade to the stop, the better the risk:reward ratio will be.
There are many other bond funds/trusts and even a few state specific like California and New York. If you are interested in some others, feel free to email me.
No comments:
Post a Comment