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2 edition of Municipal bond ratings viewed as implicit grant/tax mechanisms found in the catalog.

Municipal bond ratings viewed as implicit grant/tax mechanisms

Sullivan, Patrick J.

Municipal bond ratings viewed as implicit grant/tax mechanisms

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  • 13 Currently reading

Published by Metropolitan Studies Program, Maxwell School of Citizenship and Public Affairs in Syracuse, N.Y .
Written in English

    Places:
  • United States.
    • Subjects:
    • Municipal bonds -- United States.

    • Edition Notes

      Bibliography: p. 67-68.

      StatementPatrick Sullivan.
      SeriesOccasional paper - Metropolitan Studies Program, Syracuse University ; no. 30
      Classifications
      LC ClassificationsHG4952 .S84
      The Physical Object
      Paginationvii, 68 p. ;
      Number of Pages68
      ID Numbers
      Open LibraryOL4589966M
      LC Control Number77352062

      the ratio of municipal bond yields to the treasury yields, and something called the “implied tax rate.” The implied tax rate is the rate that equates the after-tax bond yield (in this case treasury bonds) with the municipal bond yield. It shows what tax bracket you need to be in to make investing in municipal bonds worthwhile on a yield basis. Bond insurers essentially arbitraged an artificial gap between municipal and corporate bond ratings to sell municipal bond insurers policies that did not provide the apparent margin of safety. Although they clearly benefited from an inefficiency in the credit rating system--at the expense of taxpayers and public employees--it is less clear that.


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Municipal bond ratings viewed as implicit grant/tax mechanisms by Sullivan, Patrick J. Download PDF EPUB FB2

Get this from a library. Municipal bond ratings viewed as implicit grant/tax mechanisms. [Patrick J Sullivan]. Tax free bonds, also known as municipal bonds, pay a fixed interest rate and are exempt from federal taxation.

Municipalities that issue the bonds guarantee that investors will receive their scheduled interest payments and the return of the original principal.

Municipal Bond Ratings. What is a Bond Rating. A bond rating performs the isolated function of credit risk evaluation.

A bond rating does not Municipal bond ratings viewed as implicit grant/tax mechanisms book a recommendation to invest in a bond and does not take into consideration the risk preference of the investor. Municipal bond ratings give investors information about bonds' default probabilities.

They also affect societal objectives by altering the cost of public infrastructure but are not : John Yinger.

This actively managed fund run by the Capital Group owns a mix of the best municipal bonds. AFTEX has an average tax-exempt yield to maturity of. The development of China Quasi-Municipal bonds began in with China’s tax system reform which determines the current tax-sharing fiscal system of “primary finance, first-level authority”.

Under this fiscal system, local governments often face the embarrassing situation that their responsibility is greater than financial : Chang Liu. the municipal bond rating scale, which is distinct from the corporate bond rating scale used for corporations, non-US governmental issuers, and structured finance securities.

Compared to Moody's corporate rating practices, Moody's rating system for municipal obligations places consid-File Size: KB. In The Handbook of Municipal Bonds, editors Sylvan Feldstein and Frank Fabozzi provide traders, bankers, and advisors—among other industry participants—with a well-rounded look at the industry of tax-exempt municipal bonds.

Chapter by chapter, a diverse group of experienced contributors provide detailed explanations and a variety of relevant examples that illuminate essential elements of.

Implicit tax rates priced in the cross section of municipal bonds are approximately two to three times as high as statutory income tax rates, with implicit tax rates close to % using retail trades and above 70% for interdealer trades. These implied tax rates can be identified because a portion.

Implicit Tax Rate - Implicit Tax Rate Explicit vs Implicit This preview shows page 1 out of 1 page. Implicit Tax Rate Solution: Implicit Rate on Municipal Bond = ()/10 = 30% Since Implicit rate > marginal rate it is NOT a good idea to make the investment. If implicit rate rate- then good idea to make investment.

Guidance on use of Municipal Bond Financing for Infrastructure projects PPP Cell, Infrastructure Division, Department of Economic Affairs, Ministry of Finance, Government of India September, 2 Preface The Government of India (GoI) has identified public-private partnerships (PPP) as an integral.

This customer is seeking to maximize his tax-free income and would like to invest in different types of municipal securities. A portfolio of 30% general obligation bonds, 20% high-yield municipal bonds, 20% hospital revenue bonds, 20% special tax bonds, and 10% housing revenue bonds would be suitable for this investor.

Since commercial banks prefer short-term bonds, the implicit tax rate would tend to be high for these bonds relative to long-term bonds.

Other explanations for the yield curve anomaly include tax-timing options (Constantinides and Ingersoll, ), clientele effects (Mussa and Kormendi,Kidwell and Koch, ), time-varying risk Cited by: report reflects general developments in opinion practice and the municipal bond industry since the report, including increasing complexity in federal tax law.

Future Municipal bond ratings viewed as implicit grant/tax mechanisms book may be needed over time to reflect further changes. The Board of Directors of NABL has authorized the distribution of this report.

The tax-free municipal bond market is massive. After all, it is the mechanism through which cities, counties, and states build roads, schools, hospitals, airports, sewage facilities, water lines, and so much more.

Yet, when taking a look at bond listings and their information, it quickly becomes apparent that not all municipal bonds are created. This 'Guide to Infrastructure Financing – Bank loans, debt private placements and public bonds' (the Guide) is intended for general information only, and is not intended to be and should not be relied upon as being legal, financial, investment tax, regulatory, business or other professional Size: 2MB.

The phrase “implicit tax” refers to money wage earners lose because of a governmental policy, even though the government does not call the lost money a tax. The implicit tax rate changes based on individual earnings and costs, but you can use a basic method to determine your rate.

Start studying STC Closed Book 4. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Revenue bonds c. Grant anticipation notes d. Tax anticipation notes.

A municipal bond with a 6% coupon is priced at a basis. If the bond's yield to maturity increases by 40 basis points, the yield to maturity is. While AMC was the first corporation to receive a general obligation rating for its municipal bonds, credit for floating India s first municipal bond issue goes to Bangalore Mahanagara Palike (BMP).

BMP, in Decemberissued municipal bonds for Rs crore, with seven-year maturity and a coupon of 13% per annum. The WPPSS Mess, or "What's in a Bond Rating?" A Case Study WILLARD T.

CARLETON, BRIAN DRAGUN, and VICTORIA LAZEAR This paper traces the history of the Washington Public Power Supply System (WPPSS) Projects 4 and 5 bond default, and evaluates Moody's ratings of the bonds in light of the facts available at the time, utilizing among other things a database and a ratings model developed.

Explicit vs Implicit Taxes Explicit Taxes = taxes paid directly to the government Implicit Taxes = Taxes paid through higher prices or lower returns on tax favored instruments Implicit Tax Rate = (Fully-Taxed Return - Tax-free Return) Fully-Taxed Return Ex C Corp has a 15% marginal Rate Municipal Bond - pays 7% (Equiv Taxable Bonds paying 10%).

bonds; the Traditional View concurs that the corporate tax rate determines the yield Rm,t - bt + PtPvr,t (1. 1) spread at short maturities. A paper by Trzcinka () has been frequently cited as providing strong con- where Rm,t is the yield on municipal bonds, B,r, is the yield on taxable bonds, and btCited by: exempt, where all the bond cashflows are not subject to tax, or municipal bonds subject to income tax or capital gains tax.

Municipal bonds bearing income tax liabilities are termed market discount bonds. We exploit this cross-sectional heterogeneity to estimate the effects of individual tax rates on municipal bond prices as well as to characterize how different investor clienteles respond to different tax treatments.

___ bonds are long-term, high- risk, high- interest rate corporate debt issued by companies with poor, low, no credit ratings, or engaged in high risk ventures junk Melissa Kipp owns 1, of the total 5 million shares outstanding in Ivanhoe Burkhalter corporation earned $22 million and a $10 million dividend for how much dividends will.

Taxable municipal bonds. Municipal bonds are debt obligations issued by states, cities, counties and Not all municipal bonds offer tax exemptions from both federal and state. taxes. Taxable municipal bonds are maintaining a strong credit rating.

They may also be an option for investment accounts such as IRAs, (k)s andFile Size: 63KB. Start studying Fin Exam 1 Ch. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Search. Treasury notes and bonds and municipal bonds are default risk free. True False. Bond ratings use a classification system to give investors an idea of the amount of default rate risk associated with the bond issue.

Municipal bond insurers Issuers that meet certain credit criteria can purchase municipal bond insurance policies from private companies. Insurance guarantees the payment of principal and interest on a bond issue if the issuer defaults. Bond ratings are based upon the credit of the insurer rather than on the underlying credit of the issuer.

concerning the credibility of bond ratings, new methods of credit risk assessment are required. In response to a request by the California Debt and Investment Advisory Commission, we propose various empirically-based methodologies for assigning credit scores to municipalities, using quantitative techniques that are resistant to bias.

A government bond is a bond issued by a national government. Such bonds are most often denominated in the country's domestic currency. Sovereigns can also issue debt in foreign currencies: almost 70% of all debt in was denominated in US dollars.

Government. Municipal bond ratings are designed to help investors manage risk by indicating the likelihood that a particular municipal bond will default.

Bond ratings also have significant consequences for the public interest, largely because a low rating raises the cost of Cited by: 7. By the mids, percent of the US municipal bond market was rated by Moody’s. The growth of the bond rating industry subsequently (p) occurred in a number of phases.

Up to the s, and the separation of the banking and securities businesses in the United States with passage of the Glass–Steagall Act ofbond rating was a Author: Timothy J. Sinclair. Corporate bond ratings are % more accurate than SF ratings, yet only 91% are as accurate as municipal bond ratings.

We again find large differences across subcategories of SF products. For example, CMBS ratings are % more accurate than ratings of RMBS over our sample period. DEFINITION of Special Tax Bond.

A special tax bond is a type of municipal bond that is repaid with revenues derived from taxation of a particular activity or asset.

These bonds are repaid with either excise taxes or special assessment taxes, but not by ad valorem taxes. SYLVAN G. FELDSTEIN, PHD, is a Director in the Investment Department of the Guardian Life Insurance Company of America, specializing in tax-exempt, taxable, and non-U.S.

municipal bonds. Prior to this, he was a research manager and analyst at major Wall Street broker-dealers and a rating agency.

A graduate of Columbia University, Feldstein has won the Analyst of the Year Award from the. Taxes on Tax-Exempt Bonds Andrew Ang, Vineer Bhansali, Yuhang Xing. NBER Working Paper No. Issued in November NBER Program(s):Asset Pricing, Public Economics Implicit tax rates priced in the cross section of municipal bonds are approximately two to three times as high as statutory income tax rates, with implicit tax rates close to % using retail trades and above 70% for.

The implicit tax rates reported here are calculated from yields on newly issued Treasury securities and prime-grade general obligation tax-exempt bonds. Both securities are close to riskless.2 “Prime” is the highest rating awarded to municipal bonds by Salomon Brothers.

The restriction to general obligation bonds is also important, since. Project bonds offer an opportunity for institutional investors to participate in infrastructure projects through listed, tradable securities that can offer superior risk-adjusted returns.

Challenges of using project bonds as a source of funding. The use of project bonds as a funding mechanism may be unattractive to investors with a lower. Bonds and levies are two different ways for a municipality to raise revenue. A bond is debt, offered to the public, which must eventually be repaid with interest.

By contrast, a levy is a tax that. Tax-Exempt Municipal Bonds. The federal government now gives up the ability to collect income tax on municipal bonds for a simple reason. Since the interest from the bonds is tax-free, the state. Municipal Bonds: Understanding the Fundamentals September would be considered to be of higher credit quality than the municipality’s general obligation pledge, in part because they likely share the same management team.

However, on occasion, it is deemed that the revenue bond will be considered the stronger of the two Size: KB. Like other types of bonds, municipal bonds carry credit risks. For example, a slowing economy generally creates wider price spreads between high- and medium-quality municipal bonds, offering professional managers opportunities to potentially add incremental returns .A computer-implemented, transaction-making, municipal bond trading system having a capability to conduct a private electronic auction of bid wanteds between a central brokers' broker and multiple prospective remote bidders and to maintain a reference database of accurate individual bond lot descriptions and identifications, including CUSIP (trademark) numbers.The benefits of tax-exempt bond financing can apply to the many different types of municipal debt financing arrangements through which government issuers obligatethemselves, including notes, loans, lease purchase contracts, lines of credit, and commercial paper.

Tax-Exempt Governmental Bonds Governmental bonds are tax-exempt bonds issued by a.