Municipal Bond Arbitrage Dedicated to Delivering Results

Municipal Bond Arbitrage Attorneys Based in New York

Municipal bond arbitrage involves developing a leveraged portfolio of municipal bonds with tax exempt and subsequently evading its duration risk. The evasion is performed through the process of selling equivalent taxable corporate bonds with the same maturity period by swapping interest rates. If you believe you have been involved in such an investment procedure and would like legal counsel, seek our attorneys at Weltz Law.

We can provide legal assistance to recover damages. Schedule your consultation today.

Purpose of Municipal Bond Arbitrage

The main aim of the municipal bond arbitrage strategy is to minimize credit and duration risk using municipal bonds and swapping of interest rates with similar maturity and quality. The implicit assumption of this strategy is that the municipal bonds and the interest rate swaps will continue to be closely linked.

However, since municipal bonds are tax-exempt, an arbitrageur can receive after-tax payout from the municipal bond portfolio which is more than the paid interests during the process of swapping interest rates. This strategy is attractive to some investors with high income tax brackets who will get to enjoy zero to little negative cash flow.

How Investors Lose Money on Municipal Bonds

A high percentage of investors views fixed-income investment to preserve capital. However, there are still ways which may lead to a loss in terms of both real return and literal return such as the following:

  • Bonds are commonly touted as less risky than stocks but that does not mean you will not lose money.
  • Bond prices decline as their interests rise during a negative credit occurrence or as market liquidity runs low.
  • Bond mutual funds help diversify a portfolio, but they also come with their own concerns, costs, and risks.

Pros and Cons of Municipal Bonds

Municipal bonds are generally sound investments for those keen on keeping their taxes and risks low. However, municipal bonds may not be suitable for every investor. Some of the pros and cons to be considered before choosing municipal bond investments include:

  • Tax-exempt from federal and possibly local income and state taxes.
  • Low volatility and safe.
  • Low default risk.
  • If interest rates increase, bond prices reduce.
  • Municipal bonds do not hold up against inflation as well as stocks.
  • There is still a chance of default.

The credit rating of the average municipal bonds is relatively higher, but a default cannot be ruled out entirely.

Meet with an Attorney to Discuss Your Municipal Bond Arbitrage Case. We Represent Clients Nationwide.

If you believe your investment has caused you to suffer losses and you need to get out of the contract to sustain your financial needs, seek legal advice from Weltz Law. We have a group of experienced attorneys who is prepared to work on your case.

When you engage us, you can rest assured that our attorneys will advocate tirelessly on your behalf. You can call Weltz Law at (877) 905-7671, or simply fill out our online form to schedule a meeting regarding your case.


Experienced & Effective
  • 30+ Years of Collective Experience

    Our attorneys have over 30 years of collective experience representing clients in all aspects of securities and commercial litigation.

  • Contingency Fees for Our Securities Law Clients

    We will not receive a penny in attorney's fees unless a positive recovery is obtained in your case. Contact us to see if you're eligible.

  • Free Consultations

    We will assess the merits of your claims and help you decide on the next step.

  • Litigated Claims in Excess of $50 Million for Our Clients

    Our firm is prepared to fight for you to seek maximum compensation.


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