When investors review their monthly portfolio statement the balance reflects market prices which are rough calculations of their worth.
These estimates are provided to securities market makers, clearing houses, and financial market participants to provide “mission-critical processes” across operations in trading, clearing and portfolio pricing to support real-time decision-making in the financial industry.
The two primary pricing services used by financial institutions are ICE and Markit. These firms price approximately 2.7 million fixed income and international equity securities each day, They use market data, including bids, quotes and trades to arrive at “best-guess” estimates on stock and bond prices.
These price estimates are essential to the operations in financial markets due to the enormity of volume and diverse products to account for. They are also necessary to streamline trading, support independent margin calculations, regulatory reporting while offering independent price verifications.
Muni Bond Ownership and These Price Evaluations
In general, the primary goal of most Muni bond buyers is to earn tax-free income without the worry of how the daily marketplace volatility will affect the annual income. Since the coupon on bonds, is fixed, that income is not only predictable, it is not affected by market changes. Many bond buyers will tier their bond investments to a timeline that correlates with anticipated need, all the while making predictable income, knowing the principal is safe and will be returned on a specific date.
Bond buyers are typically long-haul investors looking for income, reliability and safety. Evaluations are less significant if investors are locked in at a reasonable coupon rate, for time periods suitable to investing goals. When rates rise, many times this is opportunistic for quality bond buyers to average up to higher overall returns, while understanding that the principal is safe.
If most bond buyers are not “playing the market”, then the daily fluctuations would not interfere with tax-free income goals and the confidence knowing their principal is secure.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
