Factors Affecting the Marketability of Municipal Bonds
Chapters in this video
- 0:00 Carla's dilemma: marketability as liquidity
- 1:39 Issuer name recognition beats obscurity
- 2:45 Credit enhancements: insurance, LOC, standby purchase
- 3:14 Maturity, coupon, and pricing near par
- 3:47 Callable vs non-callable and reinvestment risk
- 4:52 Round lots, odd lots, and the $100,000 rule
- 6:06 Rapid-fire exam recap
What this video covers
- What marketability actually means: the ease of selling a municipal bond in the secondary market at a fair price without a deep price concession
- Why issuer name recognition (New York, California, Texas) beats an obscure local issuer of the same rating every time
- How credit enhancements like insurance, a letter of credit (LOC), and standby purchase agreements improve secondary market pricing
- Why shorter maturities, higher coupons, and dollar prices near par make a bond more marketable
- Why callable bonds are LESS marketable to investors thanks to reinvestment risk, even though "callable" sounds like a feature
- Why standard $100,000 round lots dominate the institutional market and odd lots force steep price concessions
- The role of the $5,000 minimum denomination as the baseline for retail marketability
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