Municipal Bond Forum

FMSbonds, Inc.’s Municipal Bond Forumâ„¢ 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-FMS-BOND (1-800-367-2663) or e-mail us.

What bond insurance does

Can you explain what insurance is and how it works? What is the risk? Is a bond with insurance as safe as a CD with FDIC insurance?

Why it's helpful to ignore prognosticators

We received an e-mail warning bondholders of higher interest rates and strategies to make a lot of money quickly. More than half of our retirement portfolio is with FMSbonds. We entrusted our funds with you in the hope that we do not have to worry about the future, regardless of interest rates, etc.

Reinvesting interest

I hold both muni funds (long term) and a large portfolio of individual munis. Now that my paper gains in the funds have evaporated, I question the wisdom of bond funds vs. individual bonds. I see the drop in prices as good news, but in the bond funds I have no "par value" to rely upon, and I am at the mercy of "yield seekers." Is my automatic reinvestment of interest in the muni fund a sound "cost averaging" strategy for a buy-and-hold investor?

S&P action in Detroit reflects Moodys view

I read where Standard & Poor’s just downgraded Detroit water and sewer bond ratings because of concerns over the possibility of the water and sewer board being restructuctered. Apparently, this might change everything for bondholders. Any thoughts on this new development?

You're never too old to maximize your income

I am 55 years old, so buying a bond that matures in 34 years seems silly. Could I sell a bond like that in, say, 10 years?

Capital gain on a discounted bond?

If you buy a discounted bond (not a zero-coupon bond) and it matures at par, is there a capital gain to report?

Can't predict refinancing

Given the current state of the bond market, do you think refinancing will stop? Do you expect long-term municipal bonds will earn higher rates in the near future, maybe 4.00% or more for quality muni bonds?

Crystal ball won't work on fixed-income investments

Regarding your article ("Good News: 'The Sky is Falling'"), what about taxable bonds? Though the coupons are good, they are callable at a lower rate than I paid and bought at a high premium.

Looking for growth and income

I’m a former retail stockbroker looking at a forced retirement. My last couple of years had no income tax but I have to take RMDs (required minimum distributions) in two years, so I’m looking at all avenues of growth and income. Since you own the bonds you sell, are your quoted prices the price paid or are there transaction costs added? If I sell a bond, do you handle that side of the transaction too, or can I sell it open market through another broker/dealer? Do you hold the security?

Detroit water supply revenue bonds

Just wanted to know if the possible bankruptcy in Detroit will impact our holding of the Detroit Michigan Water Supply Revenue Bond. I've read that creditors were told about possible changes to the management of the water and sewage department that might impact the city's ability to pay its debt on those bonds. Moody's has now downgraded all bonds to below investment grade.

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