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The Fundamentals of Municipal Bonds, 5th Edition

ISBN: 978-0-471-39365-8
Hardcover
288 pages
February 2001
List Price: US $75.00
Government Price: US $38.25
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The Fundamentals of Municipal Bonds, 5th Edition (0471393657) cover image

Preface ix

Acknowledgments xi

Writer’s Acknowledgments xiii

Chapter 1 Overview of the Municipal Bond Market 1

Introduction 1

The Issuers 3

Municipal Bond Dealers 6

Bond Brokers 9

The Lawyers 10

Financial Advisors, Specialists, and Other Consultants 11

The Rating Agencies 12

The Credit Enhancers 12

The Trustees and Paying Agents 15

The Investors 16

Information and Technology 17

The Regulators 17

Other Participants 20

Chapter 2 The Basics of Municipal Securities 21

Description of Municipal Securities 21

Yield and Price 23

Types of Yields 25

Tax Exemption of Municipal Bonds 27

Types of Municipal Bonds 33

Short-Term Securities 33

Other Characteristics of Municipal Bonds 39

Chapter 3 The Issuers 49

Introduction 49

Authorities and Special Districts 50

The Theory of Municipal Debt: Pay-as-You-Use versus Pay-as-You-Go 51

The Uses of Municipal Debt 53

The Security for Municipal Bonds 55

The Financing Process 62

The Financing Documents 65

Assessing the Impact of the Debt 72

State and Local Government Accounting 78

Chapter 4 The Primary Market 82

Issuance Trends in the Primary Market 82

The Basics of Underwriting 85

Negotiated Underwriting 90

Competitive Underwriting 93

Orders and Procedures 100

Chapter 5 The Secondary Market 104

Introduction 104

The Over-the-Counter Market 104

E-Commerce, Information, and Technology 105

Selling Municipal Bonds 108

The Basics of Municipal Bond Trading 109

Municipal Bond Trading 110

How a Trade Is Done 113

Municipal Futures 116

Providers of Data in the Municipal Market 119

Market Statistics and Indexes 119

MSRB Record-Keeping Rules 124

Chapter 6 Investing in Bonds 126

Introduction 126

The Basic Principles of Investing in Bonds 126

Measures of Yield and Return 130

Yield to Maturity and Price 131

Investment Objectives 133

Risk Factors 135

Investor Strategies 136

Taxation of Municipal Bonds 138

Other Investment Factors 147

Investor Categories 149

Chapter 7 Credit Analysis 159

Introduction 159

The Rating Agencies 161

The Rating Process 171

General Obligation Bonds 172

Revenue Bonds 181

Other Factors Affecting Credit 190

Chapter 8 Understanding Interest Rates 193

Introduction 193

Determinants of the Overall Level of Interest Rates 193

Term Structure of Interest Rates 198

Municipal Bond Rates 202

Chapter 9 Regulatory and Disclosure Requirements 206

Introduction 206

The Basis of Federal Tax Exemption 207

History of Federal Tax Legislation Affecting Municipal Securities 209

The Current Statutory Exemption 210

Application of Federal Securities Laws to Municipal Securities 214

The Municipal Securities Rulemaking Board 219

Chapter 10 Financial Products 224

Introduction 224

Interest Rate Swaps 224

Interest Rate Caps, Floors, and Collars 227

Managing the Asset Side 228

Appendix A 230

Appendix B 238

Glossary 239

Bibliography 258

Index 263

About the Writer 275

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