Secondary Market Bonds

Question 0

Almost every trade will be handled as

Answer 0

Principal basis. Rather than thru an agency trade…take place from firm inventory and this the firm is a principal acting as a dealer in the trade

Question 1

The secondary mkt

Answer 1

Is the market for municipal bonds after they have originally been sold by the underwriters in PO

Question 2

Secondary market in municipalities refers to trading in outstanding issues in the OTC market: functions include

Answer 2

The purchase and sale of bonds dealer to dealer
Maintenance mkt for dollar bonds

Maintenance of mkt for bonds that are in default

Question 3

Note the purchase of new issues bonds would be done in

Answer 3

Primary market not 2nd

Question 4

Muni dealer or trader

Answer 4

Controls their inventory positions

Provides appraisals and pro sides quotations

Question 5

Muni dealer should consider following factors when determine price

Answer 5

The prevailing or current mkt price, not acquisition, aggregate dollar amount of the transaction the expenses of the transaction

Question 6

Quotations maybe

Answer 6

Firm commitment 
Subject to prior purchase or sale 
Subject to subsequent price change
Nominal for Info only 
Affected by interest rate moves, supply and by mkt price

Question 7

Bank qualified muni bonds

Answer 7

Designation given to a public purpose bond offering by the issuer expects to issue no more than 10million par amount. When bond purchased by commercial bank. The bank may receive an 80% tax deduction for the interest cost carry for the issue

Question 8

Brokers broker

Answer 8

Makes a business out of keepin track of the bond inventory positions of other broker/dealer

Question 9

Rating and quality

Answer 9

Bonds with the highest ratings are the most marketable

Question 10

Maturity

Answer 10

Bonds with the shortest are the most liquid and carry least risk

Question 11

Call feature

Answer 11

A non-callable bond is more marketable than a callable issue

Question 12

Coupon

Answer 12

Given the same rating the higher the coupon rate on the bond the more marketable

Question 13

Block size

Answer 13

Large blocks are more marketable than small ones, $100,000 par value is a round lot. Large blocks provide Highest unit dollar price

Question 14

Dollar price

Answer 14

Ratings and other factors being the same, bonds priced at par are more marketable than those selling at a discount or premium

Question 15

Issuers name

Answer 15

National recognition of the issuers name usually makes the bond more marketable than issues of local or unknown

Question 16

Trading flat or in default

Answer 16

Bonds trading flat are less marketable with accrued interest. BONDS TRADED FLAT HAVE UNPAID INTEREST. The date of the last interest payment must be on confirmation

Question 17

Sinking fund

Answer 17

Is an additional safety factor it increases the marketability

Question 18

Registered vs Bearer

Answer 18

Muni are sold in registered form, prior to July 1983 muni bonds were sold in bearer form. Currently trade in secondary mkt