Expert: Doug Ingram - 8/21/2009

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.

The only way to be sure is to call for a bid.

I hope this helps, it's just the way it is.