New Issue Muni's

S

Stevewc

Full time employment: Posting here.
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Hello,
I was talking with a Judge (as in Lawer) in my area yesterday and thought I would run the jest of our conversation by you guys for your thoughts and opinions. This Judge is involved in the underwriting of Municipal bonds for Morgan Keegan. He told me that he personal buys a lot of individual muni's and always goes long term (20 yrs). His thoughts were to go for the higher yield and don't worry about the bonds being called. He also holds til maturity/never sells. I'm looking into buying individual muni's myself so found this interesting. I'm looking at cities in my State (G O bonds only) for the better tax benefit. I plan to build a fairly large ladder for my retirement income. Any advise Pro or Con would be appreciated.
Thanks,
Steve
 
Anybody interested in or buy individual muni's ?
Trying to decide if its a good thing for income during upcoming FIRE.
Second try for commits.
Thanks,
Steve
 
Must not be any individual muni bond buyers out there. Wish I could help you but I only own a fund.(NXQ) I might buy a few individual ones as time goes on, if the rates make it worth my while. Most of my portfolio is in my taxable account so muni's make sense.
 
I like General Obligation (GO) bonds myself. There is a bit of failsafe in that the taxing authority of where they are issued in effect "pays" the bond interest. If your community builds a library or puts in some new roads, that is generally done with GO bonds.

I would ladder the maturity, and not go out longer than 10 years, unless it's a double exempt and a stable issue with a juicy dividend (5%)
 
IIRC, and someone should correct me if I'm wrong, but when you buy muni bonds at issue you don't pay a markup - the issuer pays the underwriter/dealer the commission. So, it's probably cheaper to buy the muni bonds at issue and hold to maturity to avoid the fees associated with the secondary muni market.

My guess is that your lawyer friend is in a high tax bracket, so munis make sense for him over fully taxable bonds.
 
Thanks for the reply's.
I guess there are very few people that buy muni's direct, compared to mutual funds. But if you build a ladder of them and you are after tax exempt income they do begin to make sense.
Thanks Again,
Steve
 
I buy california munis, mostly GOs, AA or AAA rated, and 20-30 years. I have not sold any yet and don't plan to. All were bought with 5% yields or better. I am buying for income (tax-free) not accumulated interest 20-30 years from now. I'm trying to build a my portfolio so that it kicks off plenty of cash for living expense without touching the capital gains....we'll see if it works.

R
 
Stevewc said:
Thanks for the reply's.
I guess there are very few people that buy muni's direct, compared to mutual funds. But if you build a ladder of them and you are after tax exempt income they do begin to make sense.
Thanks Again,
Steve
Click to expand...

If it were me,I would keep the ladder shorter (5 years or so). I believe interest rates will be higher in the future, and although munis aren't as sensitive to interest rate increases as corporates, they still would be affected........
 
Depending on your age, the one of the best things you can do, in my opinion, is to ladder out 0% coupon muni's. In this way you can have tax free income coming due every year. Make sure they're AAA.
As to buying and selling muni's, I do it all the time. Buy bonds at a discount, if they move up enough, I'll sell and buy others at a discount. In this way, you do have a capital gain, but you're capturing it now rather than waiting years. JMO.
 
Art G said:
Depending on your age, the one of the best things you can do, in my opinion, is to ladder out 0% coupon muni's. In this way you can have tax free income coming due every year. Make sure they're AAA.
As to buying and selling muni's, I do it all the time. Buy bonds at a discount, if they move up enough, I'll sell and buy others at a discount. In this way, you do have a capital gain, but you're capturing it now rather than waiting years. JMO.
Click to expand...

Good strategy, but sometimes it's hard to find munis at a discount. I'll buy up to about 103 if it's a good issue. Much above that and you don't come out ahead, IMHO...........
 
I won't buy anything over 101. Too aggravating when an extraordinary call hits. Some of my best trades ever have been deeply discounted muni bonds. I once bought some at 19 that came back to par after about a year and a half. I think they were 6%'ers. Figure out the return on those puppies!
 
Art G said:
I won't buy anything over 101. Too aggravating when an extraordinary call hits. Some of my best trades ever have been deeply discounted muni bonds. I once bought some at 19 that came back to par after about a year and a half. I think they were 6%'ers. Figure out the return on those puppies!
Click to expand...

Which bankrupt city were they issued from??
 
Plano? No. That's where the people who overpaid for their homes live. :)
 
Thanks to everyone that added to the discussion. I'm doing my best to read and learn about buying bonds.
The link to removing the fog was very good.

From some of the books I've read on bonds, it seems that trying to find & buy new issue muni's is the best way to keep from being ripped off by the brokers. Do any of you have first hand knowledge as to this being true.
Thanks again to all,
Steve
 
Stevewc said:
Thanks to everyone that added to the discussion. I'm doing my best to read and learn about buying bonds.
The link to removing the fog was very good.

From some of the books I've read on bonds, it seems that trying to find & buy new issue muni's is the best way to keep from being ripped off by the brokers. Do any of you have first hand knowledge as to this being true.
Thanks again to all,
Steve
Click to expand...

First hand evidence of what? Being ripped off by brokers when buying munis in the secondary market? Or paying less in fees by buying at issue?
 
I was actually asking if it is truly safer and better to buy new issue. But I'm always interested in any experience either way.:D
Thanks,
Steve
 
Stevewc said:
I was actually asking if it is truly safer and better to buy new issue. But I'm always interested in any experience either way.:D
Thanks,
Steve
Click to expand...

Hi Steve, I recently sold some munis that were held my several large brokers. I ended up moving them over to Schwab and selling through their bond desk. The reason was that their mark down is more transparent (and less) than the full service dealers. I stick with the inexpensive muni funds. I can see buying individuals if you live in a high tax state, there isn't a decent state fund, and there are some good offerings available.
 
Like most anything else, it depends on whom you trust. It also depends on the size of bonds you're doing. If you're buying a large lot, buying in secondary will probably be cheaper than buying a new issue.
On the other hand, if you're buying a very small amount, many times you can find them very cheap as no brokerage wants to have a small lot hanging around.
Here's the bottom line, either you have a broker who you trust and is doing a good job for you, or you don't. However, if you're not a client, but instead a customer, it's silly to think anyone is doing anything to benefit you.
 
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