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FMSbonds, Inc.'s Bond Forum™ is an exclusive opportunity for investors to submit questions and comments on the bond market or to respond to one of our articles.
To participate, just send us an e-mail. Be sure to include your name or initials and your state of residence. Posted e-mails may be edited for length and clarity. If you prefer a private response, please note that in your e-mail. Responses are provided by James A. Klotz, president and co-founder of FMSbonds, Inc., a municipal bond specialist for more than 35 years; Dr. Jay H. Abrams, chief municipal credit analyst; and other members of the firm as noted.
Postings are listed by date. You may also view postings by topic using the search box below. If you have any questions, please call us at 1-800-FMS-BOND (367-2663) or e-mail us.
I read somewhere that no loss is allowed when premium bonds mature. Is it because you’d be expected to earn more interest?- M.S., Arizona
The premium must be amortized. There is no capital loss at maturity. There may be a gain or loss if the bonds are sold prior to maturity above or below the amortized, adjusted cost.
Please consult your tax professional to clarify your specific situation.
Do you think current muni prices have been effected by proposals out there that would abolish the tax exemption for municipal bonds or apply a 28% cap on the exemption?
- S.K., New York
Although it is difficult to know for sure, our feeling is that there is little or no impact on current prices from the threat to tax exemption.
As we said, we don't think it’s likely, but if the exemption was capped at 28%, munis would still remain the most viable option for higher-tax bracket fixed-income investors.
In the remote possibility that the tax exemption was completely eliminated, few believe the Constitution would allow it to be enacted retroactively.
“Regarding your article ‘Exemption Defenders Unite,’ please continue to keep us informed on this activity as, I agree, it is an extremely vital issue.” W.D., North Carolina
“I think your article is stupid and incites fear. Why did you send it? Should you be soliciting a protest or petition, I would support that.” A.C., California
Judging by the response we received from the article, there are many people who agree with W.D. However, for those like A.C. who wonder why we wrote it, our answer is simple: our firm has served municipal bond buyers for more than 35 years, and when there are proposals that would compromise the muni market, our clients and friends want to know about them. Keep in mind, these ideas aren’t emanating from some fringe groups. As we noted, the president is behind the effort to cap the tax benefit at 28%. As we also mentioned, we are confident his effort will fail. To ensure his proposal finds its way into the dustbin of history, we encourage you to contact your government representatives and express your opposition. They will likely agree with you.
This report is produced solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This report is based on information obtained from sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed.