Factors Affecting Marketability of Municipal Bonds
Chapters in this video
- 0:00 Bonds as a used car lot: Civic vs three-wheeler
- 1:34 Liquidity defined: selling without a price concession
- 2:08 The standard bond checklist and the $5,000 denomination
- 3:26 Odd lots, obscure issuers, and the $100,000 round lot
- 4:55 Below-market coupons and the callable bond problem
- 6:12 Credit enhancement: insurance flips a weak issuer to AAA
- 7:47 Rapid-fire exam recap
What this video covers
- What liquidity actually means on the exam: selling quickly in the secondary market without a significant price concession
- The "silver Honda Civic" checklist of marketability: high rating, short maturity, near-par dollar price, well-known issuer, and standard $5,000 denominations
- Why $100,000 is the round-lot threshold for municipal block trades, and why odd lots trade at wider spreads
- How below-market coupons force deep discounts that crush the buyer pool
- Why callable bonds are less marketable, since issuers call exactly when the income stream is most valuable to the holder
- How credit enhancement (bond insurance, letter of credit) substitutes the insurer's credit quality for a weak issuer's
- Why standby purchase agreements and remarketing arrangements are flagged as liquidity boosters on the exam
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