A Little Bit of Certainty
With my son’s school on break and a heat wave in full swing, we’ve been spending a lot of time at the library. Like many 2-year-old boys, he loves construction vehicles in any capacity, books included. Our latest library haul included a book called Construction Site: Taking Flight, by Sherri Duskey Rinker. As you may surmise, the trusty construction crew takes on an airport expansion to reduce car traffic, expand the terminal, and add new runways for the planes to use.
This storybook scenario mirrors real life. With summer travel surging— TSA reported screening 3,024,688 travelers on June 22nd, 2025 (they screened 3,088,836 passengers on the Sunday after Thanksgiving in 2024)—airports are expanding to accommodate higher traveler volume.
But how are these massive projects funded? One tool is key: municipal bonds. Municipal bonds are, in my opinion, an extremely savvy investment vehicle for investors who meet certain criteria. Let me illustrate why.
First, to borrow a statistic from the Raymond James Fixed Income Quarterly, over the past 50+ years, AA-rated municipal bonds have a “non-default rate” of 99.98% over an average 10-year period (Source: Moody’s Default Study, 1970-2023).2 What this means for you is that any principal cash you invest into a municipal bond has an extremely high likelihood of being returned to you upon the call or maturity of that bond. In other words, low risk.
Second, munis are a tax-efficient investment. Interest paid is not federally taxable, and in many cases, not taxed at a state or local level either. For example, if you have a 5% coupon on $100,000 of bonds issued in your state of residence, that translates to $5,000 of tax-free income annually. If you are in the 35% federal tax bracket with a 3% state income tax, that means you are earning the equivalent of over an 8% yield, if the investment were taxable. Eight percent is a respectable return for stock. It is a beautiful thing to see as a return on bonds.
Lastly, and this applies to all bonds, they add more predictability to your portfolio. When you buy a bond with the intent to hold it until it is called or matured, you know exactly how much principal should be returned to you, when that principal should be returned, and how much you should be paid during the time when you hold the bond. In the tumult of today’s geopolitical upheaval, the equity markets’ overreaction to headlines, and the uncertainty of so many things, a little bit of certainty can go a long way.
My family is heading to Seattle in July for a wedding—right as SeaTac undergoes expansion for the 2026 World Cup. I’ll report back on the construction! In the meantime, if you have travel stories or questions about how municipal bonds might fit into your portfolio, we would love to hear from you.
Grace LovelandJune 24, 2025
1 https://www.tsa.gov/travel/passenger-volumes
2 https://www.raymondjames.com/-/media/rj/dotcom/files/wealth-management/market-commentary-and-insights/bond-market-commentary/fixed-income-quarterly.pdf
Any opinions are those of Grace Loveland and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not indicative of future results. Raymond James & Associates, Inc., member New York Stock Exchange/SIPC.
