Municipal Bond Forum
Learning more
Q
I’d like to get smarter about muni bonds. I want to learn more about bond ratings and bonds that aren’t rated (NRs). I’d like to know how to tell if the bond has been making payments and learn any important news such as credit upgrades or downgrades for the writers. Also, there are different bond types: Health Care Facility Revenue Bonds, Airport Revenue Bonds, Industrial Development Revenue Bonds, etc. What are the default risks or down sides to these different classes of bonds? How do I find out when their bond ratings were last reviewed? I’d bet that there is some honey to be found in bonds that aren’t rated, bonds whose ratings have not been reviewed in some time, bonds with higher coupons, trade below par and may be callable. I would suspect these would be available in odd lots.
A
James A. Klotz responds:
As far as learning more about the tax-exempt bond market, bond types and ratings, we can recommend two books that are highly regarded: The Bond Market Association, The Fundamentals of Municipal Bonds, (Wiley, 2001), Fifth ed., ISBN: 0471393657. Robert Zipf, How Municipal Bonds Work, (New York Institute of Finance), ISBN 0131226568.
For detailed information on bond ratings, including their methodology, you might try the Web sites of the three major rating agencies: Moody’s Investors Service: www.Moodys.com, Standard and Poor’s: www.standardandpoors.com and
Fitch: www.fitchratings.com
While all three are designed to serve market professionals (with fees to match), they do provide limited free access. They will provide the criteria used by each agency to rate various bonds, rating trends, access to actual ratings and rating reports and other articles of interest. Further details may require a paid subscription.
Non Rated (NR) bonds will not be accessible from the rating services. You would
need the help of a broker to determine relative values for this class of bonds.
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.