A procedure that allows borrowers to sell bonds or other short-term debt instruments from past issues. The bonds are issued at their original face value, maturity and coupon rate, but sold at the current market price. |||This method of issuing additional debt was adopted by the British and French governments. Tap issues allow an organization to avoid certain transaction or legal costs and expedite fund raising. The issuer bypasses many of the initial formalities surrounding a bond issue, such as the prospectus, and proceeds to auction off the new securities. Issuing on tap is often suited for smaller fund-raising attempts, where the cost of a new issue is too high when compared to the amount borrowed.
A type of financial institution that provides a long-term mortgage on property. This mortgage will replace interim financing, such as a construction loan. Take-out lenders are normally large financial conglomerates, such as insurance or investment companies. |||Take-out lenders replace short-term lenders such as banks or savings and loans. These entities usually view the properties for which they provide mortgages as investments. They expect them to provide capital gains when they are sold, in addition to receiving the mortgage payments.
A letter of credit that has been pre-funded by the bank on the closing date, instead of when the funds are drawn as needed. The funds accessible through a synthetic letter of credit are typically held in a credit-linked deposit account until required. |||Since the funds borrowed through a synthetic letter of credit are given immediately, they are a more liquid source of funds to the borrower than a standard letter of credit. The proceeds are therefore considered more secure, as there is no counterparty risk which could result in the funds becoming unavailable.
The market niche comprised of investment vehicles exempt from federal taxes. Nearly all investments in this area are municipal bonds, which cannot be taxed owing to the fact that U.S. law forbids the federal government from taxing debt issues offered by state and local government agencies. These tax exemptions offer investors incentives to purchase low-yield government bonds over higher yielding corporate fixed income securities. |||Although most municipal bonds are tax-free, this is not always the case, as the tax status sometimes depends on what the bonds are being used for. In addition, many municipal bonds, as well as other tax-exempt investments, offer lower yields than taxable investment options.
Interest income that is exempt from federal income tax. Although it is not directly taxed, this income may still be required to determine other tax calculations such as Social Security benefits. |||For example, municipal bonds are exempt from federal and sometimes state taxes.
The Bond Buyer is a municipal bond market daily trade publication. It began production in 1891 as The Daily Bond Buyer and is headquartered in Manhattan. It is under the umbrella of Source Media, a division of Thompson Financial and is considered a leading news source for people and organizations working in the municipal finance industry. The publication's primary reader audience is municipal bond market brokers and dealers, followed by bond issuers, bond and tax counsel, bond rating agencies and credit enhancers, public finance bankers and, lastly, trustees. |||In addition to providing critical statistics and indexes utilized in fixed-income markets, The Bond Buyer provides bond issuing firms with critically-needed Legal Notice Advertising. Firms issuing bonds must comply with legal obligations to notify the public of their upcoming bond and note sales. Other legal notices that firms can run through The Bond Buyer include notices of refunding, bankruptcy, establishment of irrevocable trusts, tender offers, offers to purchase bonds, and name changes.
The remaining life of a financial instrument. In bonds, it is the time between when the bond is issued and when it matures (maturity date), at which time the issuer must redeem the bond by paying the principal (or face value). |||A bond's term to maturity is mainly used in reference to a bond's yield to maturity, which is a widely used figure that compares bonds of varying maturities. Typically, the longer the term, the greater the yield and vice versa.
Debt that has a lower chance of being repaid with interest. Toxic debt is toxic to the person or institution that will receive the payments.This debt generally adheres to one of the following criteria: default rates for the particular debt are in the double digits, more debt is accumulated than what can comfortably be paid back, the interest rates of the obligation are subject to discretionary changes. Any debt could potentially be considered "toxic," if it imposes harm onto the financial position of the holder. |||Debt is not always bad, especially if you are the lender and the borrower is making the payments. If the payments on these loans stop coming in, or are expected to stop, the debt becomes known as toxic debt. The historical costs of toxic debt securities are higher than the current market price. This can often result from unjustified high credit ratings which implies that the risk of default on the security is much lower than fundamental analysis would suggest. Junk bonds are not classified as toxic debt upon purchase, because the buyer is aware of the underlying risk of these securities.
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