A newswire service for municipal bonds that provides information on new municipal bond issues in the primary market and secondary market. |||This news service is of interest to municipal bond traders and is essentially a reporting service which traders require to analyze bond issues, such as the terms included in the bond's indenture and financial information used to assess the quality of the issue.
The difference in yields between a municipal bond and a Treasury bond with the same time to maturity. The MOB is sometimes used for determining tax strategies. |||Most MOB spread calculations actually use the yield implicit in futures prices for munis and Treasuries listed on the Chicago Board of Trade. The MOB spread is essentially a comparison of the interest rate spread between federal government debt (Treasuries) and state/municipal debt (municipal bonds).
A regulating body that creates rules and policies for investment firms and banks in the issuing and sale of municipal bonds, notes and other municipal securities by states, cities and counties. Activities regulated by the MSRB include the underwriting, trading and selling of municipal securities financing public projects. |||The MSRB was established by the United States Congress in 1975. Like the New York Stock Exchange or the National Association of Securities Dealers, the MSRB is a self-regulatory organization that is subject to supervision by the Securities and Exchange Commission (SEC).
A type of unit investment trust (UIT) that invests solely in municipal securities. Municipal investment trusts allow individuals to invest in a diversified pool of municipal bonds, which passes through tax-free income. Municipal investment trusts are designed for higher-income investors seeking tax-free income. |||Municipal investment trusts are generally available through brokers and usually have a sales charge and a minimum investment requirement. One of the primary advantages that this type of trust offers is a monthly payout of income, as opposed to the quarterly or semiannual payment of interest common with most individual municipal issues.
A bond covenant preventing certain activities, unless agreed to by the bondholders. Negative covenants are written directly into the agreement creating the bond issue, are legally binding on the issuer, and exist to protect the best interests of the bondholders. Also referred to as "restrictive covenant". |||Think of a negative covenant as a promise not to do something. Usually, negative covenants limit the amount of dividends a firm can pay to shareholders and restrict the ability of the firm to issue additional debt. Generally, the more negative covenants exist in a bond issue, the lower the interest rate on the debt will be since the restrictive covenants make the bonds safer in the eyes of investors.
When the shape of a bond's yield curve is concave. A bond’s convexity is the rate of change of its duration, and is measured as the second derivative of price with respect to yield.Most mortgage bonds are negatively convex. |||Callable bonds are negatively convex at lower yields than the yield at which the bond is likely to be called. One property of a non-callable bond is that as interest rates fall, its price will increase. However, with a callable bond, as interest rates fall, the incentive for the issuer to call the bond at par increases; therefore, its price will not rise as quickly as the price of a non-callable bond. The price of a callable bond might actually drop as the likelihood that the bond will be called increases. This is why the shape of a callable bond's curve of price with respect to yield is concave or "negatively convex."
The NYSE requirement that all orders for nine bonds or less be sent to the floor for one hour, in which time a market is sought. The rule doesn't apply if the customer directs the broker to go to the OTC market. Also known as "Rule 396". |||Because of the relative inactivity of bond trading on the NYSE (due to a number of factors including many of the listed bonds being traded OTC), this rule, which enables an order to stay on the floor for one full hour, was put in place to garner the best possible price for the individual investor.
A provision in a municipal bond issue that requires the issuing municipality to use net revenues (revenues left after expenses) from the project being financed to pay first the debt service costs of the issue. |||Similar to other restrictive provisions contained in bond indentures, a net revenue pledge serves to make the bond issue less risky for bondholders. Since the pledge effectively forces the government to use revenue from its debt-financed projects to pay debt service costs first, bondholders enjoy a reduced risk of default.
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