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Frequently Asked Questions
What Investors Should Know About Buying and Selling Municipal Bonds
How big is the municipal bond market?
Who owns municipal bonds?
Where can you buy or sell municipal bonds?
How are prices and yields determined in the municipal market?
What is the relation of bond price to interest rate and yield?
Is it safe to invest in municipal bonds?
What is municipal bond insurance?
Are tax free municipal bonds right for your portfolio?
How can I find out about Tripp & Co., Inc.'s order routing statistics?
How big is the municipal bond market?
The municipal bond market is one of the world's largest and most remarkable securities markets. Approximately $1.7 trillion worth of municipal bonds are currently in the hands of investors. There are more than 50,000 state and local entities which issue municipal securities, and 2 million separate bond issues outstanding. It would take 90 pages in your daily newspaper to list them all.
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Who owns municipal bonds?
An estimated 5.1 million households own municipal bonds in some form--either through direct ownership of individual bonds or through investment in institutional portfolios, including mutual funds, unit investment trusts, and bank trust accounts, according to the most recent figures available from the IRS. Commercial banks and insurance companies are also major institutional holders of municipal bonds.
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Where can you buy or sell municipal bonds?
Municipal bonds are bought and sold in the over-the-counter market rather than on an organized exchange. Approximately 2,700 securities dealers (banks and brokerage firms) all across the country are currently registered to buy and sell municipal bonds. For more information please contact a Tripp & Co., Inc. account executive about getting started.
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How are prices and yields determined in the municipal market?
Municipal bonds are bought, sold and priced on the basis of credit quality, maturity, liquidity and yield. Yield is the most important element for an investor in evaluating the merits of a transaction as well as comparing costs of alternatives. The municipal bond market is a dealer market and bond dealers compete with each other for customers on the basis of yield as well as service. Each bond dealer prices the bonds he or she offers at a yield which takes into consideration a number of factors. Among them are:
• What is the prevailing level of interest rates?
• What is the supply and demand for the bond?
• What is the credit worthiness of the issuer?
• Is the issuer well known and a frequent issuer?
• How actively traded are the bonds?
• What is the maturity?
• What are the call provisions?
• Is it hard to find a buyer or seller for the bond?
• What is the size of the order?
• How much service is being provided to the customer?
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What is the relation of bond price to interest rate and yield?
While the interest payment or coupon on most bonds is fixed, the market price of a security changes as market conditions change. If an investor sells his or her municipal bond prior to maturity, he or she will receive the current market price, which may be more or less than the original price. Consequently it is important to understand how the direction of interest rates might affect the value of bonds, because when interest rates decline, bond prices increase, and when interest rates increase, bond prices decline. Why?
When interest rates increase, new issues come to market with higher yields than older securities already in the hands of investors, making the value of older securities less. As a result, the prices of older securities go down. Conversely, when rates decline, new issues come to market with yields below older securities, making the older securities worth more; hence their prices go up.
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Is it safe to invest in municipal bonds?
Only US Government bonds offer a higher degree of safety as an investment. In addition, many municipal bonds and funds are insured by a third party to increase their degree of safety. Finally, there are services that rate bonds from investment grade to junk, so investors can make an informed decision. Over the years, municipal bonds have demonstrated the ability to continue to pay income in difficult economic conditions.
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What is municipal bond insurance?
Almost half of the municipal bonds issued today are insured. What does this mean? In exchange for a fee, firms that underwrite municipal bond insurance make a legally binding promise to pay the interest and principal of a municipal bond if the issuer is unable to do so because of financial difficulty or catastrophe. Currently, there are four AAA-rated firms that insure municipal bonds:
• Municipal Bond Insurance Association (MBIA)
• American Municipal Bond Assurance Company (AMBAC)
• Financial Guarantee Insurance Company (FGIC)
• Financial Security Assurance (FSA)
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Are tax free municipal bonds right for your portfolio?
Municipal bonds are IOU's issued by city, county, and state governments in order to raise money for community projects such as a highway, new school, or hospital. Their primary attraction is that the interest paid to the owner of a municipal bond is exempt from Federal taxes. In most cases, an investor is exempt from state taxes as well if he resides within the same state in which the municipal bonds were issued. Please contact an account executive at Tripp & Co., Inc. to see if municipal bonds are right for your portfolio.
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How can I find out about Tripp & Co., Inc.'s order routing statistics?
The Securities and Exchange Commission ("SEC") has recently adopted Rule 11Ac1-5, which requires market centers to publicly disclose, on a monthly basis, of order execution quality. These measures include, but are not limited to, how market orders of various sizes are executed relative to the public quotes and information about the spreads paid by investors. In accordance with Rule 11Ac1-5, Tripp & Co., Inc.'s execution reports are available for public review.
The SEC has also recently adopted Rule 11Ac1-6, which requires all brokerage firms to make publicly available quarterly reports on their order routing practices. In accordance with Rule 11Ac1-6, Tripp & Co., Inc.'s order routing statistics are available for review.
For Order Routing Please Visit: www.orderroutingdisclosure.com
Then enter the following to view statistics: TRIPP & CO INC
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Click Here For A FREE Municipal Bond Guide.
Tripp & Co., Inc. 635 Palmer Ave. West Keansburg , NJ 07734 888-48TRIPP(87477) |
Tripp & Co., Inc. |
Tripp & Co., Inc. 751-2 Coates Avenue Holbrook , NY 11741 866-874-7726 |
Tripp & Co., Inc.
40 Rector Street
New York , NY 10006
877-38TRIPP(87477)
Member NASD, SIPC
E Mail: info@trippco.com
