How To Buy City Bonds
In late 2021, interest rates were rising, and municipal bond rates were rising along with them.As of July 10, 2022, 10-year AAA-rated muni bonds returned 2.60% compared to 2.70% a week earlier. A 20-year AAA-rated bond returned 2.90% compared to 3.00% the week before. A 30-year AAA-rated bond returned 3.05% compared to 3.15% the week before."}},"@type": "Question","name": "Can You Lose Money on Municipal Bonds?","acceptedAnswer": "@type": "Answer","text": "You can lose the money you invest in municipal bonds if the issuer defaults. That risk is vanishingly small, considering that defaults on municipal bonds reached 0.05% of $3.9 trillion of outstanding debt in 2020, a time during which local tax revenues were decimated by the COVID-19 pandemic.You also could lose money on muni bonds if you are forced to sell the bonds on the secondary market at the wrong time. The price you get will be determined by the total dollar amount of the remaining interest payments due, factoring in the prevailing rates available on new issues.","@type": "Question","name": "Which States and Cities Have the Best Municipal Bonds?","acceptedAnswer": "@type": "Answer","text": "The best muni bonds from any issuer are rated AAA. They are issued by state and local governments nationwide and their bonds have been deemed AAA by one of the major rating agencies. When a government runs into economic trouble, its bond ratings suffer (but it also will pay a better interest rate in order to attract buyers).After its 2013 bankruptcy, the city of Detroit missed payments on three of its general obligation bonds. That means it was responsible for three out of seven defaults on muni bonds rated by Moody's Investors in that year. The city has since managed to work its way back from a "negative" outlook to a "stable" outlook from S&P Global as of January 2021. Its outstanding debt was rated BB-.A bond rated AAA or close to it is one of the best municipal bonds. A bond issued by a local government that is teetering on the brink of bankruptcy is one of the worst. Investors who don't care to keep an eye on the finances of state and local governments they invest in can invest in a bond mutual fund or ETF. It will be managed by someone who gets paid to pay attention to these things.","@type": "Question","name": "Are Municipal Bonds Safe?","acceptedAnswer": "@type": "Answer","text": "A municipal bond, or any bond for that matter, is safe as long as its issuer does not financially collapse. Luckily, that's highly unlikely in the U.S. bond market.The bond investor's best protection is to take care:Check the bond rating. Defaults are rare, but they happen. A rating of AAA, AA, or A indicates an issuer that is on a sound financial footing.Compare the real return on the municipal bond to other options for your money. It's always nice to save money on taxes but not at the cost of a better return for a comparable risk elsewhere, such as in high-quality corporate bonds."]}]}] Investing Stocks
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how to buy city bonds
As of July 10, 2022, 10-year AAA-rated muni bonds returned 2.60% compared to 2.70% a week earlier. A 20-year AAA-rated bond returned 2.90% compared to 3.00% the week before. A 30-year AAA-rated bond returned 3.05% compared to 3.15% the week before.
You can lose the money you invest in municipal bonds if the issuer defaults. That risk is vanishingly small, considering that defaults on municipal bonds reached 0.05% of $3.9 trillion of outstanding debt in 2020, a time during which local tax revenues were decimated by the COVID-19 pandemic.
You also could lose money on muni bonds if you are forced to sell the bonds on the secondary market at the wrong time. The price you get will be determined by the total dollar amount of the remaining interest payments due, factoring in the prevailing rates available on new issues.
The best muni bonds from any issuer are rated AAA. They are issued by state and local governments nationwide and their bonds have been deemed AAA by one of the major rating agencies. When a government runs into economic trouble, its bond ratings suffer (but it also will pay a better interest rate in order to attract buyers).
After its 2013 bankruptcy, the city of Detroit missed payments on three of its general obligation bonds. That means it was responsible for three out of seven defaults on muni bonds rated by Moody's Investors in that year. The city has since managed to work its way back from a "negative" outlook to a "stable" outlook from S&P Global as of January 2021. Its outstanding debt was rated BB-.
A bond rated AAA or close to it is one of the best municipal bonds. A bond issued by a local government that is teetering on the brink of bankruptcy is one of the worst. Investors who don't care to keep an eye on the finances of state and local governments they invest in can invest in a bond mutual fund or ETF. It will be managed by someone who gets paid to pay attention to these things.
There are two markets for municipal bonds: the primary market and the secondary market. The primary market refers to the initial issuance and sale of bonds by an issuer. The secondary market refers to the subsequent purchase and sale of bonds by bondholders after the initial issuance.
The City does not directly sell its bonds to investors in the primary market. Rather, the City sells its bonds through brokerage firms that comprise the underwriting syndicate (the brokerage firms selected by the City to participate in the initial bond sale). To buy a City bond, you must have an account either with a member of the underwriting syndicate or with another brokerage firm that can place your order through a member of the underwriting syndicate.
If you have a brokerage account, please proceed to Step 2. If you do not have a brokerage account, you will need to open one in order to purchase bonds. Each brokerage firm has its own requirements for opening an account and the new account process may take some time to complete. Investors are encouraged to begin the process well in advance of a bond sale date.
Read the preliminary official statement or the final official statement, as applicable. Preliminary and final official statements contain detailed information about a bond offering, including a complete description of the security for the bonds, the principal maturity (repayment) dates, interest payment dates, credit ratings, and the use of the bond proceeds. 041b061a72