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Most investors typically speak of the tax-free municipal bond market as if it were similar to the stock market; however, this is not the case. There is no central place or exchange to buy or sell tax free municipal bonds. The tax free municipal bond market is a huge over-the-counter market consisting of a network of independent dealers.
The tax free muni bond market is so vast that its size, which consists of approximately $4 trillion of outstanding bonds, is hard to imagine and sometimes makes finding specific information difficult to obtain.
Since institutional investors dominate the bond markets, including the muni bond market, it would be wise for the individual investor to strive to understand the mentality of the institutional investor or find a firm that does. Individuals who are unaware of the behavior of institutional investors can get hurt.
In the municipal bond market, the individual investor must function in an inefficient market designed for large institutional buyers. Individuals do not have access to the same sophisticated tools and information or possess the buying power of the professionals. When investing in muni bonds, it can be very beneficial to work with an experienced tax free municipal bond specialist.
The tax free municipal bond investor must realize that the tax free municipal bond market is an inefficient market.
There is no organized exchange that executes a municipal bond transaction. Therefore, before an investor buys or sells a municipal bond, they should consider the following:
When it comes to value, market direction, and bond pricing, a diversity of opinion can exist among municipal bond dealers. This can result in a meaningful difference in the price of a bond.
Professional institutional portfolio managers and municipal bond fund portfolio managers have considerably more than one source for their municipal bond needs. A High-Net-Worth municipal bond investor should also have more than one source for municipal bond guidance.
GMS Group is a municipal bond specialist—it’s our core financial product. GMS municipal bond specialists have in-depth knowledge of the market. They possess the expertise, relationships, and resources to provide High-Net-Worth individuals with attractively priced, high-quality tax free municipal bonds, as well as taxable municipal bonds.