Municipal Bond Forum
Finding pre-refunded bonds
Q
I am interested in municipal bonds that are pre-refunded and collateralized in U.S. securities. The maturity can go way out, as I want high interest. Why do you rate some of the municipal bonds insured by MBIA as AAA? Do you think MBIA could weather two or three bankruptcies in municipal bonds? I think it’s doubtful. I consider insurance on municipal bonds valueless. Are you a member of CIPA or SIPC?
A
James A. Klotz responds:
The ratings we display on our Web site are assigned by Standard & Poors Corp. and Moody’s Investor’s Service. FMSbonds is a bond dealer, not a rating agency.
Based on the required reserve structure of bond insurers, such as MBIA, we are confident that MBIA could easily weather multiple defaults on issues it insures.
Yes, we are a member of SIPC.
Pre-refunded bonds carry shorter maturities because tax-free bonds are typically refinanced and escrowed to their call dates. You will find a number of these offerings on our Web site designated by a “pre” on the left of the YTM column.
Start here.
Do you have specific criteria for bonds you’re looking for? Let us know and we’ll e-mail you bonds that fit your needs. There is no charge for this service.
The responses provided in this forum are meant to address specific questions posed by investors about their municipal bonds and to provide market insight for our general audience. Please note, your investments, objectives, results and experience may differ significantly. Our answers and any potential strategies discussed should not be construed as a solicitation to buy nor sell any security or investment product. All investing entails risk.