Municipal Bond Terms Part II
Marketability
How easily a security may be sold on either the primary or secondary market.
Maturity Date
The exact day, month, and year that the principal amount of a given security is due.
Moral Obligation Bond
A bond that has no legal obligation to be paid by the issuing government entity. The obligation is that a state’s credit and reputation would suffer greatly should they not pay their municipal debt; an obligation investor’s consider to be very strong.
Municipal Bond
A bond issued by some sort of government entity - state or local.
Negotiated Underwriting
Sale of bonds is made through a negotiation between the issuer and underwriter through an agreed-upon, negotiated price. The underwriter is selected before the sale and does not compete for the issue with other underwriting firms.
Notes
Promises to pay a given amount of money by way of some source of future government revenue.
Offer
The given price which a seller will agree to sell a security or bond.
Over-the-Counter Market
Securities market in which all trades are done through securities dealers and not through an exchange.
Par
A price that is equal to the face amount of a security.
Premium
The amount by which a given security exceeds its stated principal.
Primary Market
The market where new issues of bonds and/or securities are first sold.
Ratings
Ratings used to determine an issuers overall credit quality; information is made available to the public to give them an idea of the general security of such an investment.
Revenue Anticipation Note (RAN)
Notes that are issued in anticipation that the issuer will be able to pay them based on a future source of revenue aside from taxation.
Revenue Bond
Bond that is payable solely from revenue generated by the very project which the issue funds.
Secondary Market
The market where bonds and securities may be bought, sold, and traded after they have been issued and before their date of maturity. The secondary market offers investors more liquidity and security.
Special Tax Bond
A bond that is payable by way of a “special” tax, i.e. sales tax.
Tax Anticipation Note (TAN)
Issued by government entities and are payable based on anticipated taxation.
Underwriter
A securities dealer that purchases the intial lot of bonds from the issuer and then resells said bonds to investors on the Primary Market.
Unlimited Tax Bond
Bond that is secured by taxes which are not limited by a given rate or amount.
Yield
Annual percentage rate of return to be earned on a given security.
Zero-coupon Bond
Bond that does not offer periodic interest payments. The investor receives the principal amount plus interest earned (compounded semiannually) at the date of maturity.