Word: bond
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...statistics such as these are biased in favor of equities because they are derived solely from long-term U.S. data. But the excellent historical returns of stocks are not limited to the U.S. Three U.K. economists - Elroy Dimson, Paul Marsh and Mike Staunton - have examined the historical stock and bond returns from 16 countries since 1901 and published their research in a book entitled Triumph of the Optimists: 101 Years of Global Investment Returns. Despite wars, bouts of hyperinflation and depressions, stock investors in all 16 countries examined enjoyed high returns that outpaced fixed-income assets...
...biggest thing to hit the municipal-bond market in a generation," says Amy Resnick, the editor in chief of The Bond Buyer, which tracks the muni market. "It's clearly been a success as a means of stimulating the economy...
...little over a year ago, the credit crisis caused the municipal-bond market to grind to a halt. Shell-shocked investors pulled back from even munis, which are normally considered a relatively safe bet. Bond yields soared. Local governments were forced to delay raising money. And auctions of short-term variable-rate muni securities failed. (Read "Five Painless Ways to Cut Expenses...
Many credit BABs with reviving the muni-bond sector. Since the program was announced in mid-February, muni-bond interest rates, which are what local governments have to pay to borrow, have fallen dramatically. The typical municipality is now paying 3.7% when they issue a bond, down from as high as 4.5% in January, before the BABs program was announced, according to Barclays Capital. Some of the drop in yields reflects the improvement in the economy in general, and the easing of the credit crunch. But muni-bond-market observers say BABs have played an important role as well...
Under the program, the federal government subsidizes the bond payments that local governments make to investors, boosting the yield by 35%. So a typical muni bond that would normally pay 4.5% yields nearly 7% if it is issued through the Build America Bond program. The higher payments don't hurt the finances of the local government, because Uncle Sam is picking up the difference. (See how Americans are spending...