PowerShares VRDO Tax-Free Weekly ETF
Puerto Rico shares a story similar to Greece’s (GREK) in terms of its dismal economic performance and exacerbated debt issues.
For years, Puerto Rico has been using tax incentives to attract corporations to do business in its region. Over the last four decades, the agricultural economy has shifted toward the manufacturing and services sectors.
According to the American Society of Civil Engineers, the US has to spend ~$3.6 trillion by 2020 to make needed infrastructure improvements. This should mean more municipal bonds (MUB) will be issued to help finance these projects.
Callable municipal debt issuance in Q1 2014 declined ~27% in Q1 2014 to $53.9 billion on a year-over-year basis.
As with all investments, fixed income investments are subject to risks too. Bond prices increase when interest rates decline and decline when interest rates increase.
The chief advantage of investing in municipal bonds (VRD) is that the interest income on most of them is exempt from federal income taxes and often state and local taxes as well.
Energy & Utilities
Variable-rate demand obligations (or VRDOs) are long-term, tax-exempt, floating-rate bonds whose interest rates generally reset on a daily, weekly, or monthly basis.
The municipal bond (RVNU) market’s debt outstanding on December 31, 2013, stood at ~$3.7 trillion, making up about 9.2% of the total outstanding debt in the U.S.
The charm of the island has been overshadowed with feelings of pessimism regarding the fiscally distressed state of the economy.