Munis Flashcards
Muni complaints
Settled through arbitration, kept on file for 6 yrs
Analyzing GO bonds
- Taxes
- Population
- Fines
- Property values
Other types of munis
Lease revenue, double barreled, special tax, special assessment, moral obligation, PHA, auction rate, BAB
Muni quotes
Must be fair and reasonable
Amounts and maturities determined by:
Issuer
Revenue bonds
No voter approval, no debt ceiling
Debt service coverage ratio
Net OR gross revenues/principal & interest
Muni notes, 7 types
Short term, one yr or less
Most of these are anticipation - tax, revenue, combo, grant, bond, construction, and principal note, commercial note
Muni G 37 rule
May not engage business w/municipal issuer if political contribs have been made w/in last 2 yrs
Negotiated offering only
GO bonds
Voter approval, subject to debt ceiling, AKA public activity bonds
Muni allocation of orders
- Pre sale
- Syndicate
- Designated
- Member
Secondary muni market
Liquidity risk, not usually sold short
Retail
Interdealer
Institutional
Brokers broker
IDR
Industrial development revenue bond - commercial construction, private use, Corp responsible for pay off, credit rating of company, riskiest mini. AKA private activity bond
MSRB
Self reg org, 90 day apprentice period, 2 muni principals required (series 53), limited muni rep series 7, full muni rep series 52
ACAT - 3 days to validate, 4 days to transfer
Legal opinion
Requires for all munis, validates, binds, verifies tax exemption
2 types
Unqualified - no restrictions
Qualified - restrictions
Muni rule G 38
Consultants paid, licensed, agreement in writing, qtrly reporting
Negotiated offering only
Muni confirmations
Must disclose YTM or YTC whichever is lower
Official statement
Discloses all relate to info about issuer Aka muni prospectus
Analyzing revenue bonds
- Rates
- Covenants
- Flow of funds
net = maintenance first
gross = debt service 1st - Feasibility
Price and coupons determined by:
Brokerage
Loss/gain from premium/discount goes to issuer
Ad valorem tax
Based on assessed value of property, largest source of backing for GO bonds
1 mill = .001
New issue definitions
Date of sale - day bids submitted to issuer (competitive), day contract signed (negotiated)
Order period - time period syndicate solicits orders
UW period - begins when 1st order submitted to syndicate or securities purchased from issuer, whichever is 1st
Taxable equivalent yield
Municipal yield/100% - tax bracket
Primary market, 2 types of new issues
- Negotiated - issuer chooses UW, no competition, used for revenue and IDR bonds
- Competitive - issuer chooses syndicate through auction, least expensive, used for GO bonds
Notice of sale
Announcement of competitive offering, can now submit bids
NIC - net interest cost, most common
TIC - true interest cost, considers inflation
Bondbuyer.com
Includes several muni indexes, nearly all of which cover A rated munis with 20yr maturities, the number referenced in the index refers to the quantity of bonds tracked
Municipal equivalent yield
Taxable bond yield x (100% - tax bracket)
Who enforces MSRB rules
SEC
FDIC
comptroller of currency
NOT THE MSRB
Type of muni bond that needs legislative approval
Moral obligation
Whites ratings are primarily concerned with
Marketability
