Municipal Bond Forum
‘Avoiding the foul tip!’
Q
I enjoyed your piece, “The Mets, the Pundits and the ‘Old Perfessor,’” about the prevalence of bad advice offered by so many so-called experts. I have found that some brokers recommend new issue long-term bonds hot off the press with miniscule yields. Your firm offers previously issued bonds trading with significantly higher yields to call. Maybe a follow-up to your article could be entitled, “Avoiding the Foul Tip!”
A
James A. Klotz responds:
Thanks for the kind words and the astute observation.
Sophisticated muni buyers recognize that value is all about yield. In today’s market the best values are found with bonds that trade above 100.00.
If priced properly, these bonds will provide a considerably higher yield-to-the-call date than available on a new issue due the same year, as well as a higher yield to maturity than a comparable quality new issue.
The reason is simple: many inexperienced investors are averse to paying above 100.00. They don’t understand that every dollar invested (including premium dollars) is working at the stated yields.
Start here.
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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.