ch4 markets for government debt 金融市场学.pptVIP

Government Bond Market Sovereign debt Euro government bond market 40% of outstanding government bonds Three largest markets: Germany, Italy and France Sovereign debt crisis 1980, Latin American debt crisis 2008, Iceland 2010, Greece 2012, Spain Municipal Securities Markets Issued by state and local governments Tax treatment of municipal securities Capital gains Interest income At federal level At local level Purposes of municipal securities Short-term Long-term Types of municipal securities Types of municipal bonds GOB General obligation bonds backed by the full faith and credit of the issuer taxation power small portion Municipal Bonds RB Revenue bonds to finance specific revenue-generating project backed by cash flows from that project feasibility study riskier than GOB Airport revenue bonds, College and university revenue bonds, Hospital revenue bonds Water revenue bonds Markets for Municipal Bonds Primary market Public offering - underwriter Competitive bidding – GOB Direct negotiations with underwriters Private placement Secondary market trading Inactive Lack of information Yields on Municipal Bonds Compare to Treasury bond? Risk: premium Liquidity: slight premium Tax advantages: discount Yield ratio=yields on municipal security/ yields on comparable treasury security tax rate changes yield ratio Yields on Municipal Bonds Credit Risks of Municipal Bonds Second in safety (past) Since 1937, 600 Since 1980, 250 Since 2008, 15 Some municipal bonds are insured against default Results in a higher cost for the investor Current situation STOCKTON, California, 2012,7 Municipal Bond Ratings General obligation bonds Issuer’s debt structure and overall debt burden Issuer’s ability and political discipline to maintain sound budgetary policy Local taxes available to the issuer Issuer’s overall socioeconomic environment Revenue bonds Whether or not the project being financed will generate sufficient cash flow to satisfy the obligations due bondholders. Chapter 4 Markets