1. What are tax-exempt municipal bonds?
Tax-exempt municipal bonds are debt obligations issued by states, cities, counties, and other governmental entities to raise money to build schools, highways, hospitals, transportation projects, water and sewer systems, as well as many other projects for the public good.
Municipal bonds are debt securities issued by state and local governments and their agencies. The interest they pay is free from federal taxation and sometimes state and local taxes. Municipal bonds pay interest semi-annually and promise to return your principal when they mature. They can be an attractive investment choice for investors in higher tax brackets, since after-tax yields may be greater than yields on alternative taxable investments. For municipal bonds, the minimum investment is typically $5,000 with subsequent increments of $5,000.
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2. What is a New Issue?
New Issue Municipal securities sold during the initial distribution of the issue in a primary offering by the underwriter or underwriting syndicate. For purposes of MSRB rules, new issue municipal securities are municipal securities (other than commercial paper) that are sold by a broker-dealer during the issue’s underwriting period.
3. What is a Preliminary Official Statement (POS)?
A POS is the preliminary version of the official statement, which is used to describe the proposed new issue of municipal securities prior to the determination of the interest rate(s) and offering price(s). The preliminary official statement may be used to gauge interest in an issue and is often relied upon by potential purchasers in making their investment decisions. This document must be reviewed prior to making any investment decisions on the securities during the underwriting period.
4. Can I buy Bonds directly from this Site?
No. This Site is informational only. To purchase securities, review the Preliminary Official Statement and contact your broker or investment professional (see below). The Bonds cannot be purchased directly from this Site at this time.
5. How do I buy Bonds during the underwriting period?
After reading the POS and obtaining credit ratings, you may place orders directly with a broker, or have a bank trust department, money manager or investment advisor place the order on your behalf. Orders should not exceed $1 million. There is no guarantee that you will receive the Bonds but individual investor orders are usually filled first. Sometimes the Issuer gives additional priority to residents of their own state.
6. What is the minimum Bond purchase size for a new issue?
For new issue municipal bonds, the minimum quantity is typically 5 bonds (equal to $1,000 per share), or $5,000.
7. How do I request a Preliminary Official Statement to review?
To locate a specific issue, uses the Bond Locator provided here and select “Preview” under the “Official Statement” column on the far right. If you are still unable to find a specific bond issue, contact your broker or investment professional.
8. Why can’t I find a specific offering here?
There are many reasons why an issue may not appear here. The site is updated daily and is subject to availability and accuracy of timely market information. New Issues are preliminary and subject to change. Underwriting periods can be cancelled or terminated at any time. Try searching again with additional keywords.
9. Will you notify me when a New Issue is available that meets my investment criteria?
For a daily notification, please sign up on MyeBonds™ for Alerts based on a specific state or purpose. You and your investment professional will determine if the investment is suitable for your portfolio and meets your investment goals.
10. Are there risks to purchasing municipal bonds?
Yes. In general the bond market is volatile and fixed income securities carry risks. Risks include, but are not limited to, (lack of) liquidity, prepayment and early calls, inflation, credit and default risks from the issuers. Ask your investment professional for more information.
11. What are the benefits of purchasing municipal bonds
a) Tax-free income - Interest income is exempt from federal Income Tax—and if the bonds are from your home state, interest may also be exempt from state and local taxes.
b) Dependable income -coupon municipal bonds pay interest twice a year, so you know exactly how much to expect and when you'll receive it.
c) Preservation of capital - Issuers promise to repay the full face value upon maturity. And buying insured municipal bonds can further add to the security of your investment. By holding insured municipal bonds to maturity, you limit the risk to your principal. However, the credit quality of bond insurers also need additional due diligence before making a fully informed investment decision.
12. What is the difference between buying municipal securities in the primary market versus buying in the secondary market?
When an issuer sells a new issue, it is referred to as a primary market sale. In a new issue, all of the terms are set, including the price and interest rates, and the securities are sold to investors, with the issuer receiving the proceeds of the sale. The initial sales of commission are paid to the broker-dealers as an underwriters discount and are paid by the issuer form the proceeds. A retail investor who would like to participate in a New Issue should have an existing account at the time of the bond sale with, and purchase the securities through, a brokerage firm serving as one of the issuers’ underwriters or selling group members or an investment advisor, money manager, or bank trust department that will act on his/her behalf.
A secondary market transaction does not involve the issuer but is a transaction between two parties – a buyer and a seller. Secondary market transaction involve a brokerage firm which acts either as a liaison between the two parties or as a buyer or seller itself. Buyers pay sales commissions to brokerage firms to compensate them for their services in facilitating the transaction. Market conditions, such as prevailing interest rates, supply and demand and credit quality will determine the price at the time.
Still have a Question?
– or additional questions, please contact us at info@bondunderwriter.com and we will do our best to respond quickly to help find the answer for you. |