Buffett, Berkshire on Bond Binge

Back in October, Warren Buffett told the world that he was buying American equities in his personal (non-Berkshire Hathaway) account, which previously had been filled with only U.S. government bonds. But for Berkshire, on the other hand, it seems Buffett’s been focused elsewhere: municipal bonds.

According to Bloomberg News, Berkshire has doubled its stake in municipal bonds over a recent nine-month period, upping the amount of local government debt it owned to just over  $4 billion at the end of the first quarter compared to the slightly more than $2 billion it held at the end of June 2008. Berkshire added $1.09 billion in munis during last year’s tumultuous third quarter, and another $985 million in this year’s first quarter, Bloomberg stated.

According to Bloomberg, Berkshire has at the same time scaled back its stock purchases and its cash position has fallen to its lowest level in five years. The municipal-bond-buying binge was vintage Buffett: “Municipal bonds had their biggest monthly loss of 5.1 percent in September 2008, based on the Municipal Master Index created by Merrill Lynch & Co. in 1989,” Bloomberg reports. So while other investors fled munis in fear (or were forced to cash them in as redemptions piled up), Buffett pounced on high-yield bargains, just as he has done throughout his career with stocks.

Including gains in the value of securities, Berkshire’s municipal-bond holdings were actually worth $4.32 billion at the end of March, representing the highest level for the firm since 2005, according to Bloomberg.

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