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.

Puerto Rico: No answers yet

What are some of the scenarios we bondholders can now expect concerning the outcome of the Puerto Rico debt problem?

R.W., North Carolina

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Update, not recommendation

Lots of “ifs” in your article “Puerto Rico: Unable or Unwilling?”  Existing bonds insured by AGC and maybe National might pay off if we’re lucky. Payment for COFINA bonds are due Aug. 1. Puerto Rico’s debt is “CCC-” on its own. There are better opportunities out there, even Chicago!

J.M., Florida

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Uncertain ‘adjustments’

In your article, “Puerto Rico: Unable or Unwilling?” you quote the president of the Government Development Bank as saying officials expect to negotiate a “consensual adjustment” regarding Puerto Rico’s debt. What kind of haircut are we talking about? I committed my financial resources to their bonds and now I’m supposed to give even more.

G.R., Michigan

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Interest-rate sensitivity

Our financial adviser says long-term municipal bonds “could have a lot of principal risk built into them because of their interest rate sensitivity. The solution is a combination of intermediate-term municipals and a portion of high-income munis to complement them and still maintain decent yields with much less interest rate risk.” We’re confused by the term “interest rate sensitivity.”


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Premium bond called before maturity

In your article, “The Best Play for Today,” you say that the best values are premium bonds, even though it may seem “counterintuitive to many investors” (myself included). You have said in the past that one cannot claim a capital loss when a premium bond matures, even though one must pay tax on capital gains when a discount bond matures. My question is, can one claim a loss if a premium bond is called well before maturity, leading to the so-called “yield-to-worst”?

M.M., Tennessee

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