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Municipal Bond Market (municipal + bond_market)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

Secondary Trading Costs in the Municipal Bond Market

THE JOURNAL OF FINANCE, Issue 3 2006
LAWRENCE E. HARRIS
ABSTRACT Using new econometric methods, we separately estimate average transaction costs for over 167,000 bonds from a 1-year sample of all U.S. municipal bond trades. Municipal bond transaction costs decrease with trade size and do not depend significantly on trade frequency. Also, municipal bond trades are substantially more expensive than similar-sized equity trades. We attribute these results to the lack of bond market price transparency. Additional cross-sectional analyses show that bond trading costs increase with credit risk, instrument complexity, time to maturity, and time since issuance. Investors, and perhaps ultimately issuers, might benefit if issuers issued simpler bonds. [source]

Trading Activity and Price Volatility in the Municipal Bond Market

THE JOURNAL OF FINANCE, Issue 2 2004
Chris Downing
ABSTRACT Utilizing a comprehensive database of transactions in municipal bonds, we investigate the volume,volatility relation in the municipal bond market. We find a positive relation between the number of transactions and a bond's price volatility. In contrast to previous studies, we find a negative relation between average deal size and price volatility. These results are found to be robust throughout the sample. Our results are inconsistent with current theoretical models of the volume,volatility relation. These inconsistencies may arise because current models fail to account for the effects of overall market liquidity on the costs of large transactions. [source]

When States Discriminate: The Non-uniform Tax Treatment of Municipal Bond Interest

PUBLIC ADMINISTRATION REVIEW, Issue 3 2009
Dwight V. Denison
There is a long history of states using tax systems to encourage residents to invest in bonds issued by jurisdictions within their state. This preferential or discriminatory tax treatment was ruled unconstitutional in 2006 by the Kentucky Court of Appeals. The Kentucky court decision, which sets the stage for this essay, was overturned by the U.S. Supreme Court in 2008. This essay addresses the possible implications of this and similar discriminatory tax policies. Such discriminatory policies are the foundation of the municipal bond market, and altering the practice would have significant implications for revenue collections and borrowing costs in most states and localities. While the Supreme Court's position has been rendered, the case has caused policy makers and administrators to scrutinize discriminatory tax policies and their impact on budgets and borrowing costs. [source]