beliavsky[at]aol.com wrote:
- quote -

In case anyone's interested part of the "transparency" is posting recent
bond trades on a free web site:

http://www.investinginbonds.com/

Given the large # of issues you might not find the bond you're looking
at but at least you have some comparisons.

Looks like the site also reports corporate bond trades now. Some of the
YTM ranges for trades in the last 7 days exceed 0.5%, likely greater
than the variations expalainable by interest rate variations. I would
expect a study of the corporate bond market to show similar conclusions
to that of the muni market: "mutual funds get better pricing."

-Tad

I own muni bonds funds but have wondered if I ought to be buying muni
bonds directly to avoid management fees.

A recent paper by Harris and Piwowar called "Municipal Bond Liquidity"
studies the trading costs of municipal bonds for both retail and
institutional investors. The paper can be obtained in PDF format from
http://papers.ssrn.com/sol3/papers.c...ract_id=503062 . It is an
academic paper and is not easy reading, but the conclusions, quoted
below, are clear.

"Municipal bonds are expensive for retail investors to trade. Using
new
econometric methods that we tailor to the limited availability of bond
market data, we find that effective spreads in municipal bonds average
almost 2 percent of price for representative retail-sized trades
(20,000 dollars). This is the equivalent of almost four months of
total annual return for a bond with a 6 percent yield-to-maturity.

Municipal bond trades are substantially more expensive than similar
sized equity trades. If the cost of trading 500 shares of a 40-dollar
stock (20,000 dollars) were 2 percent, its effective spread would be
80 cents. Observed effective spreads in equity markets for retail
sized trades are rarely that high, even for the most illiquid stocks.
Those stocks for which transaction costs are so high have vastly more
credit risk than does the average municipal bond.

Retail-sized municipal bond trades are more expensive than
institutional-sized trades. Unlike in equities, municipal bond
transaction costs decrease with trade size and do not depend
significantly on trade frequency.

We attribute these results to the general lack of price transparency
in the bond market. We expect that ongoing regulatory initiatives to
increase transparency in the municipal bond market will lead to
liquidity improvements. These improvements should have the greatest
impact on retail investors."