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Municipal Bond Insurance

Many investors say that they “will only buy insured bonds.” But do they really know what bond insurance promises? Issuers of insured bonds generally have a lower underlying bond rating which has compelled them to buy insurance to be able to make the bond issue more attractive to buyers. Be advised, though, the bond insurance only guarantees the timely payment of principal and interest over the life of the bond, and these guarantees are subject to the paying ability of the insurer. The insurer is not obliged to repay principal immediately upon the issuer’s default. They are not obliged to call the bond early. They are not obliged to pay any premium price for the bond, and they do not guarantee the market price of the bond, which will fluctuate prior to maturity. Buying insured bonds is a good thing, but other AAA-rated bonds, like treasury or government-backed, or those rated AAA on their own, also ought to be considered by those who buy “insured bonds only.”

Click for Municipal Bond Insurance PDF

If your portfolio is greater than $500,000, Sharon Alister can provide a free analytic review to help ensure that your portfolio is in line with your investment goals. Call Sharon Alister at (800) 745-7110 or email info@AlisterTalksBonds.com

 

Interest Rates (Indications only)

Please note the rates for Ins’d and Pre-Res are not available from Bloomberg and will be updated as soon as possible.

Treasuries AAA Munis
3mo 1.815 N/A
6mo 2.009 N/A
1yr 2.237 1.74
2yr 2.482 1.87
5yr 2.809 2.19
10yr 2.970 2.53
30yr 3.145 3.14
today's rates chart

AAA Rated Munis

Pre-Res Ins’d Pure*
2 yr 1.91 2.05 1.87
5 yr 2.23 2.49 2.19
10 yr N/A 2.89 2.53
15 yr N/A 3.20 2.82
30 yr N/A 3.50 3.14

*Rated AAA on its own
Source: Bloomberg

Municipal Bond Insurance

Many investors say that they “will only buy insured bonds.” But do they really know what bond insurance promises? Issuers of insured bonds generally have a lower underlying bond rating which has compelled them to buy insurance to be able to make the bond issue more attractive to buyers. Be advised, though, the bond insurance only guarantees the timely payment of principal and interest over the life of the bond, and these guarantees are subject to the paying ability of the insurer. The insurer is not obliged to repay principal immediately upon the issuer’s default. They are not obliged to call the bond early. They are not obliged to pay any premium price for the bond, and they do not guarantee the market price of the bond, which will fluctuate prior to maturity. Buying insured bonds is a good thing, but other AAA-rated bonds, like treasury or government-backed, or those rated AAA on their own, also ought to be considered by those who buy “insured bonds only.”

Click for Municipal Bond Insurance PDF

If your portfolio is greater than $500,000, Sharon Alister can provide a free analytic review to help ensure that your portfolio is in line with your investment goals. Call Sharon Alister at (800) 745-7110 or email info@AlisterTalksBonds.com

 

Interest Rates (Indications only)

Please note the rates for Ins’d and Pre-Res are not available from Bloomberg and will be updated as soon as possible.

Treasuries AAA Munis
3mo 1.815 N/A
6mo 2.009 N/A
1yr 2.237 1.74
2yr 2.482 1.87
5yr 2.809 2.19
10yr 2.970 2.53
30yr 3.145 3.14
today's rates chart

AAA Rated Munis

Pre-Res Ins’d Pure*
2 yr 1.91 2.05 1.87
5 yr 2.23 2.49 2.19
10 yr N/A 2.89 2.53
15 yr N/A 3.20 2.82
30 yr N/A 3.50 3.14

*Rated AAA on its own
Source: Bloomberg

Investing involves risk, including possible loss of principal. When investing in bonds, it is important to note that as interest rates rise, bond prices will fall. Conversely, as interest rates fall, bond prices will rise.

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