Ohio Bonds (Ohio Municipal Bonds)
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Ohio bonds or Ohio municipal bonds are long-term loans to the Ohio state or local government agency. These are purchased through a stockbroker. The interest on Ohio municipal bonds are generally given twice a year.[br]
Table of Contents
Ohio Municipal Bonds: History
Tax-exempt municipal bonds were first issued in the US in 1936. However, they were introduced in Ohio only in 1965. In 1984, the issue of tax-exempt municipal bonds was subjected to a ‘Volume Cap.’ This was a federally authorized program, which allowed the use of the tax exempt bonds for financing different projects in the state. This authority enabled the bond issuers to acquire interest rates lower than the conventional market rates.
Between 1984 and 1991, Ohio’s bond program was administered by several Executive Orders. However, in January 1991, the Executive Orders were replaced by the ‘Joint Select Committee on Volume Cap’ for overseeing bond administration and allocation. The committee works closely with the Ohio Department of Development for monitoring Ohio’s Volume Cap.
Top Ohio Municipal Bonds Fund
Some popular names in the Ohio municipal bond funds are:
· Victory: The Fund primarily invests in a portfolio of Ohio municipal bonds rated ‘A’ or above. The average maturity period of the fund is between 3 and 15 years.
· Nuveen: This fund is administered by Nuveen Asset Management (NAM). As of September 30, 2009, Nuveen Ohio municipal bond funds had net assets worth $522.9 million.
· Dreyfus: This fund is diversified by allocation in different sectors, which includes healthcare, utility, education and transportation. Typically over 70% of the asset’s funds are invested in investment-grade bonds and the remaining in municipal bonds below investment grade, which are high-yielding bonds.[br]
Ohio Bonds: Pros and Cons
Ohio bonds are a safe investment option, providing decent returns. The interest rate on Ohio bonds typically lie in the 7-8 percent range. Moreover, some Ohio bonds are backed by insurance, which guarantee that the principle as well as compounded interest will be paid regardless of the status of the project. In addition, Ohio municipal bonds are exempted by the State government from federal income tax.
Although a profitable investment option, purchasing municipal bonds in Ohio has certain disadvantages as well. Since the interest rate on Ohio municipal bonds is fixed, investors may consider other lucrative investments options. Also, not all municipal bonds are tax free in Ohio. The Ohio Department of Taxation taxes income or dividends from all non-Ohio municipal bonds.
