Municipal Bond Forum

FMSbonds, Inc.’s Municipal 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, and other members of the firm as noted.

Postings are listed by date. If you have any questions, please call us at 1-800-367-2663 or e-mail us.

Premium vs. discount muni bonds

Why would one choose to buy discount rather than premium municipal bonds, acknowledging that one might need to pay tax based on the de minimis rule? This will lower the final yield.

H.S., Florida

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Time value on municipal bonds yields

I always enjoy your articles. They’re concise, informative and most interesting. With regard to “Rethinking Your Reinvestments,” as a customer of FMSbonds, my view is that going long with yields at 4.00% to 4.50% may not be advantageous. While tax-free income is desirous, one must take into account real inflation and/or the time value of money, which effectively erodes the real value of the interest payments and their purchasing power. In other words, bonds generating $450 per $10,000 today won’t have the same effective value in, say, 2048 or in 2053, etc. Can you comment on this?

W.H., New York

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Municipal bond funds vs. individual municipal bonds

I read your article, “More Muni Investors Selecting Their Own Bonds,” and would like to learn more about getting out of municipal bond funds and buying individual municipal bonds. My main concern is that if I sell the munis, their price has been hammered due to low interest rates, so I am in essence selling low and buying high. That said, I still would like to have a conversation as I could put my dividends and interest payments into individual bonds.

M.W., Ohio

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Market value of municipal bonds

When can we expect the market value of our municipal bonds to start rising? I know that we get face value when the bond comes due, but I was wondering when the value goes up.

D.J., Florida

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Selling and rebuying muni bonds

Sorry but I do not follow your article (“What’s Concerning Some Muni Investors”). Of course, all of the smart investors sold their bonds at a profit the first of this year and then bought them back when interest rates went up. I only wish that I had done that! That would have been much smarter than to hold them. I have seen my $3 million-plus municipal bond portfolio go from being worth a premium of more than 10% to negative of about 15%.

F.G., Georgia

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