June 2024
Understanding Municipal Bonds | Flipping in the Municipal Bond Market
Underwriting municipal bonds in the public market can be a complex and nuanced undertaking. Along each step of the process, incentives for the different parties involved can be discovered that lead to actions which impact how bonds are sold and, therefore, affect the price, or interest rate, of the bonds. One of those actions is the practice of flipping municipal bonds.
October 2023
Understanding Municipal Bonds | Understanding the Role and Value of a Municipal Advisor
One of the most important questions facing an issuer in the debt issuance process is whether to engage a Municipal Advisor (MA), an underwriter or both. Some issuers have historically conflated the two roles, a practice that was much more prevalent prior to the inception of Rule G-23 of the Municipal Securities Rulemaking Board (MSRB), which prohibits a single firm from acting as both underwriter and MA on the same bond issue.
May 2023
Arbitrage Strategies for the Issuance of Bonds
When a municipal entity sells tax-exempt bonds or other types of debt obligations, the issuer must comply with IRS regulations guiding how bond proceeds are used. This provision of tax law offering a tax-exemption is designed to encourage investment in public projects and lower the cost of the financing for governmental entities. Since investors do not pay federal taxes on interest earnings, this exemption comes at a cost to the federal government; therefore, the IRS has developed rules on when and how the tax-exemption can be used.
April 2023
Understanding Municipal Bonds | Should an Issuer Buy its Own Bonds?
Whether they are providing education, well-paved streets, or anything in between and beyond, units of local government have a specified purpose to provide for the public good. As public entities, local governments are not typically seen as sophisticated financial institutions that participate in complex financial instruments.
July 2022
Understanding Municipal Bonds | Forward Settlement Current Refundings
When the Tax Cuts and Jobs Act was signed into law in December 2017, issuers lost the ability to sell tax-exempt advance refunding bonds. Among several available alternatives, forward settlement bonds can uniquely allow issuers to not only take advantage of current interest rates, but also benefit from tax-exemption.
April 2022
A Strategic Approach to Issuing Pension Obligation Bonds
As any local government official knows, pension liabilities are a mounting problem for municipalities throughout the State of Illinois (the State). According to the Illinois Municipal League (IML), as of the end of 2020, over $30 billion of pension liabilities across more than 650 different public safety pension systems fall on the shoulders of local municipalities and the limited forms of revenue available to them.
April 2022
Understanding Municipal Bonds | Continuing Disclosure Overview
Most issuers of municipal bonds must provide certain financial information (“Annual Information Filing”) to the market and update that information on an ongoing basis after the closing of a bond issue in an annual filing called continuing disclosure. This information mainly reflects the financial health of the issuer after an issuance of bonds and is made available to the public and more specifically for bondholders and other stakeholders.
May 2021
Understanding Municipal Bonds | Official Statement Overview
What is the “Official Statement?”
An important aspect of the bond issuance process is the preparation of an offering document, commonly called the Official Statement. This document is prepared by or on behalf of the issuer and is utilized by issuers and municipal underwriting firms to provide material and accurate information about the issuer and the securities being issued to potential investors.
January 2021
Understanding Municipal Bonds | Should an Issuer Buy its Own Bonds?
Whether they are providing education, well-paved streets, anything in between or beyond, units of local government have a specified purpose to provide for the public good. As public entities, local governments are not typically seen as sophisticated financial institutions that participate in complex financial instruments.
October 2020
Understanding Municipal Bonds | What Determines the Price of a Municipal Bond?
In our last series, we looked at how municipal bonds are sold to an underwriter(s) for resale or a direct purchaser(s), found below. In this issue, as we look at how municipal bonds are priced, it is important to understand that the process of selling municipal bonds is a nuanced and complex activity.
June 2020
Understanding Municipal Bonds | How Municipal Bonds are Sold in a Public Offering
Many of us are familiar with municipal bonds, either as an issuer, an investor, or, for a much smaller number of us, a participant in the municipal bond industry. Generally speaking, the idea is simple. A unit of government needs to borrow money for any number of public purposes, and investors have the capital to lend to these governments in exchange for a rate of return.
December 2019
NIC, TIC, AIC & Bond Yield – What’s the Difference?
This is the third edition of Muni Bonds 101: “NIC, TIC, AIC & Bond Yield- What’s the Difference?” which begins with foundational terms that will be used when discussing different measures of the cost of financing associated with a bond issue.
September 2019
Premium Bonds After the Call Date
This is the second edition of Muni Bonds 101: “Premium Bonds After the Call Date” which compares callable and noncallable premium bonds and points to consider when evaluating premium bonds after the call date
July 2019
What is a Premium Bond?
This is the first edition of Muni Bonds 101, an educational series launched by PMA Securities, LLC (PMA) to educate the issuer community on matters related to municipal bonds. While PMA’s professional staff is committed to the municipal bond market daily, many issuers in PMA’s client base issue bonds only a few times a year to once every 10 years or longer.
