Muni Bond (and Muni Bond Fund) Discussion

perinova said:
How does a call work? you receive a message a month early and on the day the bond (aka the principal) is automatically returned to your account with interest?
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In most cases, an optional early call date is established when the bond is issued. While bonds were in a bull market (i.e., interest rates were falling), it was a pretty good bet that the early call option would be exercised. Now, maybe not so much.

Some munis, particularly housing and student loan bonds, have extraordinary call provisions. As loans and mortages are paid off, the borrowing agency may issue a partial call on relatively short notice. Moreover, the likelihood of an extraordinary call may be unrelated to the trend in interest rates.
 
jazz4cash said:
Was there ever any explanation for how this blunder occurred?
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When the administrator from Regions Bank called back, she simply said "We had the wrong call date". Which by my thinking meant that they had to have the wrong date in their computer system since the bonds were originally issued.

The bigger point in my view is how the call actually works? Is it the administrator who makes the decision or the issuer? I would think that it's up to the issuer to decide to call, and they tell the administrator that they are going to call. So, logical thinking would lead me to believe that both the issuer and the administrator had to have it wrong, or both made mistakes. Wouldn't you think? Either that, or they just shoveled me the best they could come up with on short notice.
 
I would speculate the date in the computers is correct but the issuer simply misread the call date. Issuer directed admin to call the bond and there are no checks/balances for this form of human error. I can’t see admin deciding on their own but could’ve had a blanket instruction to call as soon as possible.
 
jazz4cash said:
I would speculate the date in the computers is correct but the issuer simply misread the call date. Issuer directed admin to call the bond and there are no checks/balances for this form of human error. I can’t see admin deciding on their own but could’ve had a blanket instruction to call as soon as possible.
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This has becaome a pretty regular thing for me. I think I've gotten four incorrect call notices in the last six months.
 
That’s crazy. I have about 140 muni issues and I don’t think it’s ever happened to me
 
Things beginning to get interesting. 10-year approaching 2.0%. Will 2.0% be resistance, or will we plow through that?

I just picked up a pre-refunded issue being redeemed 10/1/2025 for 2.5%. Not bad at all.
 
I bet we plow through. I’m down to a single 3% add on CD so the timing for rates to rise feels lucky to me.
 
jazz4cash said:
I bet we plow through. I’m down to a single 3% add on CD so the timing for rates to rise feels lucky to me.
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My personal maturity curve is very conservative, with about 10% maturing the remainder of this year, 10% next year, and 15% in 2024...assuming no additional calls besides what I currently know, and there's obviously going to be some more. So my plan is to simply roll maturing and called issues in to new ones at higher yields. I'm also dabbling a bit more in some strong bank preferred shares and exchange traded debt, both of which have been push a bit lower by the recent interest rate rise.
 
I am similar to njhowie. About 10% matures in each of the next few years. The plan is to continue to roll it into more bonds.
I feel if you stay true to the ladder process it will reward you.
 
COcheesehead said:
I am similar to njhowie. About 10% matures in each of the next few years. The plan is to continue to roll it into more bonds.
I feel if you stay true to the ladder process it will reward you.
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Birds of a feather, my friend.
 
A good website for muni investors that I like is fmsbonds.com. They have decent articles by the president, James Klotz, and he provides a level-headed long-term perspective.

Here's his latest article, which provides some words of wisdom while the market is getting frenetic.

Fed Rates Debate Masks What’s Important to Muni Investors

https://www.fmsbonds.com/news-and-p...bate-masks-whats-important-to-muni-investors/
 
Picked up tax free insured muni with disclosure anticipating being called in 6 months (new issue expected to be floated to refinance) 2.47% yield to call. If they don't call, then 3.62% YTM Feb 2027.

Again, not bad at all.
 
njhowie said:
Picked up tax free insured muni with disclosure anticipating being called in 6 months (new issue expected to be floated to refinance) 2.47% yield to call. If they don't call, then 3.62% YTM Feb 2027.

Again, not bad at all.
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That bond may hold up to maturity. I imagine we'll see fewer calls as interest trates rise.
 
I do not hold any munis (unless they are in BND?) and it is not an asset class I want to study and hold, not high enough income to warrant learning more. But...I want to support my local library as I volunteer and donate there and they will be issuing a bond. I am happy to buy some but don't want to throw money away, I could just make a donation. But if buying the bond will help I can't find much of interest in fixed income these days so might as well hold something like this. I'm not trying to get the highest return but just want to avoid a disaster. Any quick advice on what to look for and what to avoid?
 
yakers said:
I do not hold any munis (unless they are in BND?) and it is not an asset class I want to study and hold, not high enough income to warrant learning more. But...I want to support my local library as I volunteer and donate there and they will be issuing a bond. I am happy to buy some but don't want to throw money away, I could just make a donation. But if buying the bond will help I can't find much of interest in fixed income these days so might as well hold something like this. I'm not trying to get the highest return but just want to avoid a disaster. Any quick advice on what to look for and what to avoid?
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If the bond issue is unrated, then avoid it. If the bond issue is rated lower than A, avoid it. If you stick to A-rated or higher, the probability of facing a default situation is on the order of 1 in 10,000, and even then, though there may be a default, you would likely recover 100% of the face value of your bonds and all interest due.

As far as the local library, I suggest simply making a donation, which may be tax deductible as a charity donation. Maybe 10 years ago, DW was moonlighting at a local hospital. They were building and moving in to a new complex, they were issuing bonds, and gave all employees the prospectus in advance of the general public. I forget if the bonds were rated BB or B, but I laughed and told her we're not touching it.

In general, municipal bonds are extremely safe. It is difficult to go wrong. I've said many times, it would be extremely difficult for even an inexperienced muni investor to pick an issue which will default. Stick to A-rated and above, and it's virtually impossible.
 
yakers said:
I do not hold any munis (unless they are in BND?) and it is not an asset class I want to study and hold, not high enough income to warrant learning more. But...I want to support my local library as I volunteer and donate there and they will be issuing a bond. I am happy to buy some but don't want to throw money away, I could just make a donation. But if buying the bond will help I can't find much of interest in fixed income these days so might as well hold something like this. I'm not trying to get the highest return but just want to avoid a disaster. Any quick advice on what to look for and what to avoid?
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I really think bonds need to be part of a strategy, a bond ladder with specific dates of maturity and have the tax free nature be a benefit, not an after thought. So I would not recommend buying just one issue as a show of support for this entity. A donation likely makes more sense in your case.
 
njhowie said:
Picked up tax free insured muni with disclosure anticipating being called in 6 months (new issue expected to be floated to refinance) 2.47% yield to call. If they don't call, then 3.62% YTM Feb 2027.

Again, not bad at all.
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What's the CUSIP?
 
I stumbled on this bond this morning: CUSIP 606432CQ3, Missouri state college bond, maturing 10/23 with call of 3/12/2022. The odd call date suggests to me that the call is a given, although Fidelity lists no defeasance or call announcement. Coupon is 2.89% to maturity and ask is face value. So it may be a wash for the purchaser after markup if the bond is called in a month.

Looking at the documents associated with the bond, there are several failure to report notifications and administrative shakeups. S&P rates the bond BBB.

It's only a $5K bond, and I don't see a point in buying - even with a 2.8% yield - if it's going to be called in a month. I do see some bonds like this pop up occasionally, so I thought it might be a subject for discussion. Would anyone care to discuss?
 
Mr._Graybeard said:
I stumbled on this bond this morning: CUSIP 606432CQ3, Missouri state college bond, maturing 10/23 with call of 3/12/2022. The odd call date suggests to me that the call is a given, although Fidelity lists no defeasance or call announcement. Coupon is 2.89% to maturity and ask is face value. So it may be a wash for the purchaser after markup if the bond is called in a month.

Looking at the documents associated with the bond, there are several failure to report notifications and administrative shakeups. S&P rates the bond BBB.

It's only a $5K bond, and I don't see a point in buying - even with a 2.8% yield - if it's going to be called in a month. I do see some bonds like this pop up occasionally, so I thought it might be a subject for discussion. Would anyone care to discuss?
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The odd "next" call date is that it's continuously callable after the initial call date - meaning they can call at any time they like with 30 days notice. If you check on it tomorrow, the "next" call date field will show 3/13/2022 and it will keep moving forward a day as each day passes, unless they really do call them. Considering that they've not called since Oct 2017 when they were first able to, suggests they aren't going to call - especially when they have other muni issues at 6% coupon and higher...2.9% is extremely cheap for them.

Someone purchased it for 100.0 (99.9 + $1 markup) about an hour after your post, which is fine, so long as they're ok with the relatively poor quality of the issuer. I've seen a number of this issuer's bonds over the past year, and specifically earlier this week at the top of the taxable muni yield list and have always passed on them because the quality was poor and didn't want to get involved with it.
 
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