Selling a municipal bonds can often be a difficult task for individual investors. What bond investors quickly realize is that unlike selling a stock, where there are several thousand individual ticker symbols and a centralized exchange with an actively quoted bid/ask spread, municipal bonds are bought and sold through an over-the-counter market. This market is made up of a network of individual bond dealers that bid on the price of the bond that you have for sale. Many individual municipal bonds trade infrequently, some once per day, others every week or every month. There are nearly one million individual municipal bonds that are identified by what is called a CUSIP (Committee on Uniform Security Identification Procedures), similar to a social security number for that bond issuer; it is a unique identifying feature that stays with the bond for the life of the security, and is assigned to the bond when it is issued.
The way for investors to ensure that they are getting a fair deal when they sell their muni bonds is to find a trusted professional that deals in the municipal bond space. That means asking your uncle who sells variable life annuities to get you an executable quote on a muni bond is not always the best approach. Also investors should use all available information to determine if a price is fair and appropriate, including but not limited to, Municipal Securities Rule Making Board’s (MSRB) trade data on their EMMA website (http://emma.msrb.org/), comparative yield scales, and even evaluated prices provided by third party pricing services. Some of these may or may not be provided by your discount brokerage house, which is why you should deal with experienced municipal professionals when transacting in municipal bonds.
Municipal bonds are held by so many individual investors and the transparency can be a challenge thus being aware that prices can vary widely is crucial. The bottom line is that you are entitled to best execution by your broker because it is the rule.
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Las Olas Wealth Management of NatAlliance Securities LLC
Member FINRA, MSRB
About Las Olas Wealth Management
Las Olas Wealth Management of NatAlliance Securities LLC led by Dean Myerow and Sean Vesey provides high-net-worth families and investment professionals with direct access to the municipal bond market. Our approach to portfolio management is to combine customized computer assisted modeling to purchase and ladder kicker bonds, many of which are insured general obligation and essential service bonds. The results for our clients are short duration, high quality municipal bond portfolios which are diversified by sector and region.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors.
All bonds and market data shown above are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security. Supporting documentation for any claims or statistical information is available upon request.
Municipals and tax-exempt bonds are not necessarily a suitable investment for all persons. Information related to a security’s tax-exempt status (federal and in-state) is obtained from third-parties and Las Olas Wealth Management of Nat Alliance Securities LLC does not guarantee its accuracy. Tax-exempt income may be subject to the Alternative Minimum Tax (AMT). Capital appreciation from bond funds and discounted bonds may be subject to state or local taxes. Capital gains are not exempt from federal income tax.