Municipal Bond Terms
Accrued Interest
The sum, in dollars, of interest accrued on an issue. Figure is based on the interest rate as stated on the issue. Interest begins to accrue from the date of delivery and continue until the date of maturity, both stated on the issue.
Ad Valorem Tax
In Latin, “To the value”; a tax that is based on the value of tangible property.
Alternative Minimum Tax (AMT)
An alternative way to calculate tax under IRS standards.
Ask Price
The price that the seller of an issue seeks from buyers; the offer.
Auction Rate Bonds
Tax exempt bonds whose interest rates are periodically reset through dutch auctions.
Bid Price
Price at which an investor or purchasing agent is willing to buy securities.
Bond
Official legal document of debt that states a given rate of interest, a term to maturity; bonds are considered long-term securities and have maturity dates more than 13 months from their time of sale.
Bond Anticipation Note (BAN)
Note that is issued in anticipation of a bond being issued at a later date; a BAN is typically paid off with the proceeds of the actual issue.
Bond Buyer
The Bond Buyer is the bond market’s daily newspaper; all information, including new issues, market trends, and news, is published in The Bond Buyer.
Bond Counsel
A lawyer or group of lawyers that handle(s) the legal issues involving the issuing of a bond on behalf of the issuers.
Bond Funds
A portfolio of assets invested in bonds, typically managed by an investment company.
Bond Broker
The middleman between issuers and dealers that buys and sells on behalf of said parties.
Call
Paying the principle before the stated maturity date.
Closing Date
Date of delivery for bonds and the payment for the issue.
Competitive Underwriting
The sale of municipal securities to an underwriting firm in which the firms offer sealed bids to buy the new issue.
Concession
Discount from the public offering; only used in the case of the underwriting firm selling to other dealers outside their own firm.
Coupon
Amount of interest due, date of payment, and location of payment that is stated on the bond; interest rate of a bond.
Current Yield
In terms of percentage, the ratio of interest to the actual market price of bond.
CUSIP
Committee on Uniform Security Identification Procedures; formed to develop method of identifying all municipal securities. A unique CUSIP number can be found on all securities.
Dealer
Commercial bank or securities firm that underwrites, trades, and sells municipal securities.
Default
The failure to pay the interest of principle on the stated due date.
Discount
In percentage or in dollars, the amount by which a bond is for sale less than its face amount.
Discount Bond
A bond that is sold for less than its par value.
Double Exempt Bond
A bond that is exempt from federal as well as state taxation.
Face Amount
The par value of a given security as it appears on the issue itself.
Financial Adviser
A financial consultant that provides the issuer with information and advice regarding the financial procedures of a new issue.
General Obligation Bond (GO)
Municipal bond that is secured by the full faith, credit, and taxing power of the issuer.
Interest
The amount to be paid to the lender in exchange for the borrowing of money.
Issuer
Government agency or authority that is able to borrow money through the issuing of municipal securities.
Letter of Credit (LOC)
A letter guaranteeing the payment of debt, typically issued by a large commercial bank,in the event that the issuer cannot make timely payments on its own.