"Thousands" of orders from brokers are pouring into the Public Securities Association for a new brochure on tax swapping, a newly revived technique for improving retail business in a down market, said a PSA spokesman.

Brokers are requesting multiple copies of the brochure, which was completed the week before last, to distribute to customers who may want to turn "paper" losses in their municipal bond portfolios into "real" losses.

The brochure describs swapping, its benefits, and some basic rules. Tax swapping "is part of the business and has always been part of business," but "you can't take a tax swap unless you have a big drop in bond prices," said one analyst with an institutional investor.

With rising interest rates, investors have seen the value of their bonds dive this year, leading to a surge of interest in tax swapping.

Most such transactions probably would be completed after Christmas and before the new year to achieve a tax benefit.

According to the PSA brochure, the traditional tax swap involves two steps: "selling a bond that is worth less than you paid for it and simultaneously purchasing a similar bond at approximately the same price."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.