Muni Bond Prices

Municipal Bonds, or Muni Bonds, are issued by municipalities, counties, and cities to fund their major public projects, such as road and highway construction, utilities, schools, and hospitals. In purchasing Muni Bonds, the investors lend money to the bond originators who promise to pay a specific amount of interest (annually or semiannually) and who repay the principal to the purchasers on a specified maturity date. Usually tax exempt from Federal, state, and local taxes, Muni Bonds are popular with many investors.

Investors can research the financial and major newspapers and their business pages which list commonly traded municipal securities and prices. Also, the internet has available websites of financial groups which offer information about Muni Bonds. Municipal securities brokers-dealers will also quote Muni Bond Prices. Muni Bond Prices are based on million dollar lots and show a volume discount--therefore sales and purchases of smaller bond amounts will vary depending on the order size.

A Muni Bond "price" really represents a 'cents on the dollar' value. For example, since all bonds are quoted as cents on the dollar, the Bond price 100 would be equal to 100 cents on the dollar. Therefore, a price of 100 would result in $10,000 worth of bonds which would cost the investor $10,000. However, if the Muni Bond Price is 108, the investor would be paying 108 cents to the dollar; or in the case of $10,000 worth of bonds, he/she would be paying $10, 800 for the Muni Bond.

The investor needs to be aware, however, that Muni Bonds do carry a certain amount of risk. The investor should study the issuer's credit ratings which are graded by rating agencies such as Standard & Poor's and Fitch. Also, many banks and brokerage firms have research departments that analyze Municipal Securities. These bond ratings actually assess the issuer's reliability in repaying the bond's face at maturity. A leading resource for Muni Bond information is Emma--Electronic Municipal Market Access; Emma's website (emma.msrb.org) is "The Official Source for Municipal Disclosures and Market Data."

Actually, most Muni Bond issuers have excellent records of meeting their obligations in a timely manner concerning interest and principal payments to the bond holders. The fluctuations of the Stock Market can affect Muni Bonds, although it cannot change the bond's coupon rate during its lifetime. Additionally, if bonds are sold before maturity, the current market price can affect the Muni Bond Prices, causing them to be less or more than their original prices.