EVP Systems gets its mutual bond prices from Intercontinental Exchange (ICE).
Through ties within the municipal bond community, ICE gets information each day on actual municipal bond sales. They use that information to estimate movements in the market for bonds and for the issues of particular municipalities.
Market conditions are combined with descriptive information on all the individual securities, including interest rates, payment schedules, ratings, insurance status, call and put schedules and other information. All of these become points in a “matrix” that influence their estimated value of the securities. A rich descriptive database is crucial in evaluating a bond.
The IRS Code, Reg. 20.2031-2 (c) (d) and (f) refer specifically to “bona fide bid and asked prices.” Bona fide bid and ask prices are not available for municipal bonds. Reg. 20-2031-2 (f) states that when
…actual sale prices and bona fide bid and asked prices are lacking, then the fair market value is to be determined by taking the following factors into consideration: (1) In the case of corporate or other bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors…
EVP Systems retrieves what ICE refers to as the “Best Price” and “Unadjusted Best Price.” Their description of these data items is as follows:
[Best Price] retrieves the price generally accepted as the most appropriate representation of a security’s closing market value based on individual market conventions. [Unadjusted Best Price] is similar to [Best Price], except that the data are not adjusted for capitalization changes.
EVP Systems retrieves the “Unadjusted Best Price” for municipal bonds. (A distinction between “adjusted” and “unadjusted” is only relevant for equities.) We note these prices as “Mkt”, or market, prices.
If you want more information about how we price municipal bonds, details are available at ICE.