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Author: KingOfTown Three stars, 500 posts Old School Fool Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35640  
Subject: Re: Researching municipal bonds Date: 7/27/2009 9:03 PM
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OID = Original Issue Discount

Sinking Fund:

Not sure that will give you the advice you are seeking, but at least it handles the definitions.

I don't think you can count at all on the ratings to actually provide you with that simplistic a percentage. In any event, even if your DD allows you to come to the conclusion that there is an 80% chance of survival, that doesn't really help on an individual bond basis. The result will be either 100% (all payments met and $1000 returned at maturity) or some other value (unlikely to be 80%) that comes from the total of payments received and some work-out value in the bankruptcy. For corporates, one can make some assessment based on the assets of the company. For muni's, I'm not sure how a bankruptcy would work. I suspect it depends on whether the bond is backed by some income stream of the underlying asset that the bond funded or whether it's a general fund obligation.

- who bought his first individual bond last week, but used Charley's spreadsheet formulas for calculating yield. Pretty sure I didn't get a great bargain, but you have to start somewhere and the amount was small (and it apparently last traded 3% higher than I paid). Learn by doing.
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