The predecessor association to the Bond Market Association, which represents the largest securities markets in the world, the bond markets. The Public Securities Association was incorporated in 1976, and underwent a name change to the Bond Market Association in 1997 to better reflect its broadened constituency and membership. |||The Bond Market Association represents a diverse mix of securities firms and banks, from large firms to niche specialists, with 70% of member firms having their headquarters outside of New York City. Its members collectively account for a significant majority of U.S. municipal bond underwriting and trading.
An unsecured, unsubordinated debenture issued by a public company. PINES trade on a stock exchange but also bear interest. |||These types of securities are in that gray area between bonds and preferred stock.
A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. |||Ratings range from AAA or Aaa (the highest) to C or D, which represents a company that has already defaulted.
An agreement made between a debtor and a creditor to repay some or all of a debt. Reaffirmations are made on a purely voluntary basis by the debtor. The bankruptcy code stipulates that the debtor's attorney must file a statement with the court affirming that he or she can repay the debt without incurring further personal financial harm. |||Reaffirmations cannot legally require the debtor to repay the debt. Lenders have no real leverage from them, and can only rely on the good faith intent of the debtor to repay the debt. This type of arrangement is prohibited under Chapter 13 Wagearner plans.
A price at which the underwriting syndicate of a debt issue resells the bonds to public investors. The syndicate will purchase the bonds for a specified amount from the issuing firm and re-offer the bonds to the public, usually at a different price. |||An underwriting investment bank may facilitate a debt issue by agreeing to purchase all of the bonds for a price below face value. Having the underwriters purchase the bond issue, instead of passing the sale onto the public, removes the company's risk of not selling the entire issue. The investment banker will re-offer the bonds to public investors at a higher price, which may be above (premium) slightly below (discount) par value. In a serial issue, most common to municipal GO bonds, the first bonds to mature are frequently at a premium with a higher coupon rate. The last bonds to mature in the offering are sometimes sold at a discount, but carry a lower coupon rate.
A type of forward financial contract that creates an obligation for its investors to purchase a particular bond issue at a specified yield at some date in the future. The money from investors is held in escrow and is used to purchase interest-bearing U.S. Treasuries, which are either sold or allowed to mature, providing proceeds to be invested into the new bond issue with an interest rate that is locked in with a forward contract. Investors participate early in the new bond issue (typically municipal bond) but will temporarily receive taxable income from the Treasury held in escrow. |||The issuance of REDs allows investors and underwriters to circumvent restrictions in the tax code that don't allow for certain municipal bond issues to be pre-refunded. Pre-refunding is a common strategy for issuers of municipal debt, as minor swings in interest rates can amount to millions of dollars in saved interest.
Bonds that have their principle cash amount already held aside by the original issuer of the debt. A subset of the municipal and corporate bond classes, the funds required to pay off refunded bonds are held in escrow until the maturity date, usually by purchasing Treasury or agency paper. Also known as "prerefunded bonds". |||Refunded bonds will typically be 'AAA' rated due to the cash backing and, as such, will offer little premium to equivalent-term Treasuries. The date of refunding will usually be the first callable date of the bonds.
1. The risk that an early unscheduled repayment of principal on mortgage-backed securities(MBS) will occur when the underlying mortgages are refinanced by borrowers. All MBS buyers assume some level of prepayments in their initial yield calculations, but an increase in the level of refinancing (which usually occurs as a result of falling interest rates) means that MBSs mature faster and will have to be reinvested at lower rates. 2. For a mortgage borrower, the risk that he or she will not be able to refinance an existing mortgage at a future date under favorable terms. |||1. The prepayment estimates used to price mortgage-backed securities are made based on market conventions known as "speeds". There are two primary measures of mortgage prepayment speeds: the conditional prepayment rate and the Public Securities Association standard prepayment model. 2. Typically, refinancing risk is associated with short-term mortgage products such as hybrid ARMs and payment option ARMs. Borrowers often take on unforeseen risks when they assume that they will be able to refinance out of an existing mortgage at some planned future date - usually before a payment or interest rate reset date - to avoid an increase in their monthly payments. Interest rates might rise substantially before that date, or home price depreciation could lead to a loss of equity, which might make it hard to refinance as planned.
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