AboutDoug Ingram Expertise Fixed income portfolio allocation and strategies for institutional investors. Having designed multi-scenario risk quantification and cash flow projection models for nearly 25 years, Strategic Technical Initiatives can answer your regulatory, SFAS 115 allocation, securities selection, and other questions dealing with yield curve placement and portfolio mix strategies. I perform detailed portfolio analysis and strategy ideas for SAMCO Capital Markets. We are Dallas based, and I am in the Memphis office.
Experience Trading and designing portfolio strategies since 1980.
Question QUESTION: Doug
I have a municipal bond (CUSIP 132813BU9) due to mature next month. It is rated AAA/AAA and, as I understand it, is "insured". Because it is a "Zero Coupon" bond, I would only receive a single final payment of principal and accumulated interest at maturity. Accordingly, the only monitoring I have had over the years comes from the broker's statements, which are fairly perfunctory. In spite of the ratings and insurance, the current economic situation could make honoring the payout difficult, and so I was wondering just where I could find out about the financial status of the municipality and the possibility of and hang ups next month.
Thanks.
DBRJ
ANSWER: Since the bond is about to mature, just call the broker and get them to check it. There won't be any commission involved since it's going to mature, but you could ask them for a bid.
If the bid is near par (100), that's a good sign.
If it's over, you could offer it to them.
If the bid nowhere near the statement price, maybe an alternative broker should be checked.
---------- FOLLOW-UP ----------
QUESTION: My last monthly statement from the broker lists a "Market Value" very close to the final expected price. I presume this would be equivalent to explicitly asking for a quote. I guess I had wondered if there was an independent agency that monitored bonds and their current "real" value.
Thanks for your help.
DBRJ
Answer Actually, most every brokerage firm uses a pricing matrix to do the market values.
The only live markets are the ones traded continuously (like stocks, Treasury bonds, futures, etc.).
The only way to get a better indication is to call your broker (or another) and ask them for a bid.
There are pricing services that charge $$$ per CUSIP, but even they are using a pricing matrix.
