Municipal Underwritngs Flashcards
What method are GO bonds normally sold through?
Through competitive bidding
How are revenue bonds usually sold?
Through a negotiated offering
What does the bond counsel do?
Draws up the Bond Contract, Trust indenture, and renders an opinion on an issue (opines).
What is the official notice of sale?
This includes maturities and bond/bidding information. It is published in the Daily Bond Buyer, and the lowest interest rate wins the bid
What is a good faith check?
A check of usually 2 percent of a bond’s par value that is basically a deposit for the winning bid
Can a financial adviser act as an underwriter?
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
When is a syndicate letter (syndicate agreement) binding?
Not until actual bid is submitted by syndicate.
Are you allowed to solicit sales for municipal bonds?
Yes. Unlike corporate bonds. These are called pre sale orders, and are accumulated PRIOR to winning the bid
What is writing the scale?
This is a yields scale that scales up as maturities lengthen.
What is the spread?
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
When are announcements sent over Munifacts wire?
After the bid is won
What are pre-sale orders?
Existing pre sale orders are confirmed after bid is won and filled first (PGDM)
What are group net orders?
Syndicate and selling group members which are taken during order period immediately after pre-sale orders (ID of customer is disclosed to manager)
What are Net designated orders?
After bond period is finished, if bonds remain unsold, order designates specific syndicate members to be allocated the profit (ID of customer NOT disclosed)
What is a member takedown order?
Confirmed to syndicate member at net price less total takedown for syndicate’s own inventory
What is the order of accepting orders?
PDGM - please give a damn about municipalities
- Pre sale order
- Group net orders
- Designated orders
- Member takedown orders
What is the Daily Bond Buyer?
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
What is the Visible Supply?
Aggregate competitive bid and negotiated long term muni. offerings scheduled for the next 30 days. (long term only)
What is the placement ratio?
The ration of Bonds sold to bonds issued. You want it to be high if you are about to underwrite a bond
What is the Bond Buyer 40?
40 municipals, GO and revenue bonds, w/ average maturity of 25 years (daily)
What is the 20 Bond Index?
20 GO bonds w/ 20 years to maturity, all rated A or better (20/20, weekly index)
What is the 11 Bond index?
The best 11 out of the Bond 20 index
What is the RevDex 25?
25 REVENUE bonds of 30 years to maturity rated A or better
What is Munifacts?
It announces new issue offerings - competitive and negotiated
