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Subject:  Why buy Munis? Date:  4/11/2001  9:05 PM
Author:  ericjp1 Number:  1487 of 36505

Hello Fools,

I don't see any reason for anyone to buy Muni bonds because it seems any tax savings are eaten up by the broker's markup/commission. My wife and I are saving to buy a new home in about six years. I thought because we are in the 31% tax bracket I would check out munis for the tax saving. Looking at all the online bond brokers, I cannot find a muni in my state (VA) with a YTM greater than 4% because the bonds are being sold for so much over par. When looking into Corporate is easy to find bonds with the same rating and maturity with a YTM of 6.5 to 7%. These would give me an after tax yield of about 4.2 to 4.5%.....Why would I ever want to buy the Muni and hand over all my "tax savings" to the broker? Please let me know if I am missing something here b/c it seems like a no brainer to me.

Thanks in advance,

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