Selling Municipal Bonds Through Schwab Versus Fidelity

Get The Best Price For Your Muni Bonds

Is It Time To Sell Your Muni Bonds?

Bond prices have risen as interest rates have fallen. Muni bonds, though, are a bit more difficult when it comes to pricing.

These bonds have a supply and demand component unlike treasury bonds, though similar to the whole host of sovereign bonds.

When you want to sell your muni bonds, a bond dealer must find a buyer for your particular bond.

Right now, Illinois, California and Puerto Rico bonds may suffer from a lack of interest and prices can fluctuate quite a bit day to day in ways that have little to do with the current interest rate moves.

One particular Miami-Dade county bond I was selling today is subject to AMT (alternative minimum tax) and – on some days – buyers are less abundant for that issue.

And just because you have a zero coupon bond that you have held for the last ten years don’t think you are sitting on a huge capital gain due to the interest rates falling if that bond happens to be from the wrong municipality (think Chicago, Illinois).

Time to Sell Bonds?

Many market prognosticators have been saying to sell muni bonds for a couple of years now, and for the most part they have been early in their call. Interest rates have continued to drop and fewer municipalities have gone bankrupt than many expected over these crisis years.

That said, we personally want out; especially Illinois, California and Puerto Rico.

With the proceeds we will watch for good opportunities to pick up certain tax free munit ETF’s and dividend stocks (yes, taxable). The nice thing is that we get much better liquidity and certainty of pricing. We ourselves we early in our sell of some NAD; the shares rose from $15.15 to 16.00, back to 15.15 and now are again in the high $15’s.

The account those shares were in simply was not able to tolerate seeing NAD go back under $15 as it had since the financial crisis. Sleep factor counts.

Which Online Broker Is Better For Selling Muni Bonds?

Today I was selling muni bonds out of one account at Charles Schwab online brokerage and others at Fidelity. There is quite a difference in procedure.

With both online brokers I begin by calling the bond department of the respective broker – Fidelity’s automated system is a bit more aggravating than Schwab’s – and talking to a real person who speaks perfect English and is very cordial.

We go through the list of bonds that I want bids on. Getting those bids back is where the biggest difference comes in.

With Charles Schwab, a representative calls me back – within the hour – and tells me what the bid is for the bond. He also tells me how the price compares to recent trades. These prices are typically 1 – 3% lower than is listed via my current portfolio but often that is because I am the seller. Other times it can be because I am only trading 5 – 25 bonds whereas many of the trades are 50+ bonds.

With Fidelity, you can have someone call you but you can also allow them to email you with the info and click a link to set up a sell on your own. The bids come in as Fidelity gets them so some are soon and some are later. I chose the email route.

It is possible to get a list of past trades with Fidelity when you are logged into your online brokerage account. That’s kind of nice to see for yourself what price a particular bond has changed hands at and whether it was a retail buy or sell.

With Schwab, the representative had bids for all 11 bonds. 2 seemed kind of low and he recommended re-bidding them next week and even offered to make himself a note to do it automatically for me.

Many of the prices that I actually received were a little higher than he quoted.

With Fidelity, one of the bids I accepted was cancelled. I was not “notified” of this, I only noticed via the orders page online. This bond was one I had in both accounts and I am guessing I lost the trade to myself. Note here that the bond sold at 110.831 at Schwab and with Fidelity they offered me 110 even less a $25 commission ($1 per bond).

2 of the bonds I tried to sell through Fidelity did not come back with a bid; one was a Puerto Rico bond…

Schwab Versus Fidelity

So at this point I can say that I am happier with the Schwab muni bond selling experience than I am Fidelity. While it’s nice to do more online myself at Fidelity, I like that I received better prices at Schwab and that I had a real person monitoring the trade for me so I could get the best price and know that the deal did not fall through.

I have done this before at both online brokerages so I can say that today’s experience could be considered typical and not an anomaly. Always remember that your mileage may vary and I am not making any investment recommendations one way or another regarding buying or selling municipal bonds, bond funds or any other investment.