Are issued by states or local governmental units to finance current operations in anticipation of future tax receipts. TRANS are notes that are issued in anticipation of both taxes and revenues.
The initial offer by a company seeking to buy another. The bid can be in cash shares or a combination. Bids usually have a closing date for acceptance. The bid can be hostile (without the acceptance or cooperation of the target company), or friendly (accepted by the target).
A municipal bond whose interest is not excluded from the gross income of its owners for federal income tax purposes. Certain municipal bonds are taxable because they are issued for purposes which the federal government deems not to provide a significant benefit to the public at large.
A broad category of bonds that are secured by taxes levied by the obligor. The taxes are not necessarily unlimited as to rate or amount, so while all general obligation bonds are tax backed, not all tax-backed bonds are general obligations. Examples of tax-backed bonds include moral obligations and appropriation-backed bonds. This category is also known as tax-supported.
The total property and resources subject to taxation. (See “assessed valuation.”)
A common term for municipal bonds. The interest on the bond is excluded from the gross income of its owners for federal income tax purposes under Section 103 of the Internal Revenue Code of 1954, as amended. Municipal bonds that are also exempt from state and local as well as federal income taxes are said to have double or triple tax exemption.
A short-term promissory note issued for periods up to 270 days, often used in lieu of fixed-rate BANs, TANs and RANs because of the greater flexibility offered in setting both maturities and determining rates. The purpose for issuing TECP or TXCP can be the same as that for BANs, TANs and RANs.
A formula which converts the lower yield of a tax-exempt security into the higher yield of a taxable security. The tax-exempt yield is divided by 100% less the investor’s marginal tax rate, and the resulting quotient is expressed as a percentage. This allows investors to compare equivalent yields on the two securities.
The weekly average auction rate of the three-month Treasury bill stated as the bond equivalent yield.
Technical analysis claims to be able to forecast future market movements solely through the study of past market price and volume data. It contrasts with market forecasts based on the analysis of the fundamental factors influencing supply and demand for shares, currencies or commodities, so-called fundamental analysis. Technical analysts, also known as technicians or chartists, try to identify price patterns and trends in financial markets and exploit them. They search for chart patterns such as head and shoulders or double top reversal patterns, study indicators such as moving averages and look for chart support and resistance levels. Major investment banks and brokerages normally employ technical as well as fundamental analysts. The Random Walk Theory developed by Burton Malkiel, an American economics professor, casts doubt on the validity of the claims made by technical analysis. The theory is described in Malkiel’s book ‘A Random Walk Down Wall Street’ and holds that prices follow a random and unpredictable path and that past performance cannot be used to forecast future direction.
The Treasury/Eurodollar spread is the difference between the yield on the three month U.S. Treasury Bill and the three month Eurodollar LIBOR rate. It is a measure of the premium over ultra-safe U.S. Treasury Bills that banks demand for lending to each other. Normally around 20 to 40 basis points, the TED spread ballooned to nearly 500 basis points in the autumn of 2008 at the height of the panic over the stability of the global financial system.
A public offer by a company to the shareholders of another company to buy their shares, usually at a premium to the current market price. Tender offers are often part of a takeover bid and are usually made subject to the bidder obtaining a minimum number of shares and the automatic expiry of the offer after a certain number of shares have been acquired.
A financing done to meet specific cash-flow needs for a specific period of time.
A market where there is little buying or selling interest, with low volume or activity.
A bank’s tier one capital comprises equity, disclosed reserves and retained earnings. Under capital adequacy standards set for commercial banks by the Bank for International Settlements (BIS) at least half of the 8 percent of capital required to be set against risk-weighted assets must be tier one or core capital. Supplementary capital, or tier two, constitutes the rest. This includes undisclosed reserves, general provisions against loan losses, subordinated term debt and hybrid capital instruments with the characteristics of debt and equity.
The component of an option premium, which takes into consideration the time to expiry and the volatility of the underlying instrument.
Total return is the dividend plus any capital gains or losses achieved by investing in a stock expressed as an annualized percentage of the amount invested.
Investment performance measure over a stated time period which includes coupon interest, interest on interest, and any realized and unrealized gains or losses.
The date upon which a security is purchased or sold.
The high and low trading points of a security over a period of time. Sometimes referred to as the high/low; technical analysts watch to see if the price breaks above or below the high or low since this can be a signal about its future trend
The French word for “slice”, tranche usually refers to part, segment or portion of an investment issue such as a specific class of bond or mortgage backed security within an offering in which each tranche offers different terms including varying degrees of risk. Tranche may also refer to the segment of the bond offering being distributed in different geographical areas.
The party appointed by an issuer to maintain records of bondholders, cancel and issue certificates, and address issues arising from lost, destroyed or stolen certificates.
The concept of disseminating price, volume and other information to the public about transactions in the municipal market.
Securities designed to protect investors and the future value of their fixed-income investments from the adverse effects of inflation. Using the Consumer Price Index as a guide, the value of the securities’ principal is adjusted to reflect the effects of inflation. Also known as Treasury Inflation Protected Securities (TIPS).
U.S. Treasury securities are debt obligations of the U.S. government. These include bills, notes, bonds, TIPS, and Savings Bonds. When you buy a Treasury security, you are lending money to the federal government for a specified period of time. Treasury bills are short-term instruments with maturities of no more than one year. Treasury notes are intermediate- to long-term investments, typically issued in maturities of two, three, five, seven and ten years. Treasury bonds cover terms of more than ten years and are currently issued in 30-year maturities. Interest is paid semi-annually. For more information on buying Treasury securities see the government’s website www.treasurydirect.gov.
Charges paid by an investor to a broker for the purchase and sale of securities.
The market interest rate at which the terms of a security might change. Triggers are common on index amortization notes and range securities.
Designation for insurers offering superior security on both an absolute and a relative basis. Such insurers have been judged to possess the highest safety and have the capacity to meet policyholder obligations.
A triple top or triple bottom is a price pattern in technical analysis formed when a market rises or falls three times to a similar level and then reverses. It is a signal that strong support or resistance exists at those levels and that a change in market trend is likely.
A method of calculating bids for new issues of municipal securities that takes into consideration the time value of money (see “net interest cost”).
It is called a true-sale opinion from a law firm before the securities can receive a rating higher than that of the sponsor.
The rate of return to the investor taking into account the payment of capital gains at maturity on a bond bought at a discount.
Agreement between the issuer and the trustee (1) authorizing and securing the bonds; (2) containing the issuer’s covenants and obligations with respect to the project and payment of debt service; (3) specifying the events of default; and (4) outlining the trustee’s fiduciary responsibilities and bondholders’ rights. Generally does not include an assignment to the trustee of collateral to secure the payment of debt service.
An institution, usually a bank, designated by the issuer as the custodian of funds and official representative of bondholders. Trustees are appointed to ensure compliance with the trust indenture and represent bondholders to enforce their contract with the issuers.