Municipal Underwritngs

Question 1

What method are GO bonds normally sold through?

Answer 1

Through competitive bidding

Question 2

How are revenue bonds usually sold?

Answer 2

Through a negotiated offering

Question 3

What does the bond counsel do?

Answer 3

Draws up the Bond Contract, Trust indenture, and renders an opinion on an issue (opines).

Question 4

What is the official notice of sale?

Answer 4

This includes maturities and bond/bidding information. It is published in the Daily Bond Buyer, and the lowest interest rate wins the bid

Question 5

What is a good faith check?

Answer 5

A check of usually 2 percent of a bond’s par value that is basically a deposit for the winning bid

Question 6

Can a financial adviser act as an underwriter?

Answer 6

No. Because the adviser is attempting to get the lowest interest rate to the issuer, while the underwriter attempts to bid the highest that will win the bid

Question 7

When is a syndicate letter (syndicate agreement) binding?

Answer 7

Not until actual bid is submitted by syndicate.

Question 8

Are you allowed to solicit sales for municipal bonds?

Answer 8

Yes. Unlike corporate bonds. These are called pre sale orders, and are accumulated PRIOR to winning the bid

Question 9

What is writing the scale?

Answer 9

This is a yields scale that scales up as maturities lengthen.

Question 10

What is the spread?

Answer 10

It is set by the syndicate and includes

• Management fee
• Total Takedown (syndicate members that sell directly to the public
• Selling concession: what selling group earns
• Additional takedown: what syndicate members earn if bonds are sold through selling group

Question 11

When are announcements sent over Munifacts wire?

Answer 11

After the bid is won

Question 12

What are pre-sale orders?

Answer 12

Existing pre sale orders are confirmed after bid is won and filled first (PGDM)

Question 13

What are group net orders?

Answer 13

Syndicate and selling group members which are taken during order period immediately after pre-sale orders (ID of customer is disclosed to manager)

Question 14

What are Net designated orders?

Answer 14

After bond period is finished, if bonds remain unsold, order designates specific syndicate members to be allocated the profit (ID of customer NOT disclosed)

Question 15

What is a member takedown order?

Answer 15

Confirmed to syndicate member at net price less total takedown for syndicate’s own inventory

Question 16

What is the order of accepting orders?

Answer 16

PDGM - please give a damn about municipalities

1. Pre sale order
2. Group net orders
3. Designated orders
4. Member takedown orders

Question 17

What is the Daily Bond Buyer?

Answer 17

Municipal primary market newspaper, printed daily and on web. It gives the Calendar of Municipal offerings for both negotiated and competitive bids for bonds with 5+ year maturities

Question 18

What is the Visible Supply?

Answer 18

Aggregate competitive bid and negotiated long term muni. offerings scheduled for the next 30 days. (long term only)

Question 19

What is the placement ratio?

Answer 19

The ration of Bonds sold to bonds issued. You want it to be high if you are about to underwrite a bond

Question 20

What is the Bond Buyer 40?

Answer 20

40 municipals, GO and revenue bonds, w/ average maturity of 25 years (daily)

Question 21

What is the 20 Bond Index?

Answer 21

20 GO bonds w/ 20 years to maturity, all rated A or better (20/20, weekly index)

Question 22

What is the 11 Bond index?

Answer 22

The best 11 out of the Bond 20 index

Question 23

What is the RevDex 25?

Answer 23

25 REVENUE bonds of 30 years to maturity rated A or better

Question 24

What is Munifacts?

Answer 24

It announces new issue offerings - competitive and negotiated