Covered Bonds
February 12, 2025
Just like we have the single stage Free Cash Flow to the Firm (FCFF) model, we also have the Free Cash Flow to Equity model. This model also is not used by analysts in advanced calculations. Rather it is used for the most rudimentary back of the envelope calculations for deriving the equity valuation of […]
In the previous article, we have already seen how the valuation of a sporting franchise can be found using the income approach. This approach relies extensively on finding out the cash flow that is likely to accrue to the sporting franchise and then discounting it at a predetermined discount rate in order to find out […]
America has been the hub of financial and entrepreneurial activity ever since the end of World War 2. However, over the past few years, the number of corporations that are using America as their base has been steadily declining. This is because of the unfavorable tax policies in America. America is the only country in […]
Anyone working in the investment banking industry for a few years has definitely come across the term “leveraged buyouts.” It creates huge risks, as well as investment opportunities. Over the years, many investment banks have been involved in financing several big-ticket leveraged buyouts. In this article, we will explain in detail what a leveraged buyout […]
Amazon and FedEx have traditionally had a love-hate relationship. On the one hand, Amazon is one of the biggest customers of FedEx, whereas, on the other hand, it is also one of their biggest competitors. Amazon has already made its intentions clear. In the long run, they do not want to be associated with FedEx, […]
We already know that bonds are issued by a wide variety of entities. Bonds are routinely issued by corporations, banks, and even governments all over the world. A special category of bonds called municipal bonds (munis) are issued by various local governments across the globe. These bonds are often categorized separately because they have certain special characteristics. In this article, we will have a closer look at what municipal bonds are as well as the pros and cons of investing in such bonds.
Municipal bonds are IOUs that are commonly issued by local governments. Hence, when investors invest in municipal bonds, they are ideally giving money to local governments to build projects. It is common for municipalities to issue bonds to finance projects such as roadways, railways, and even canals. The market for municipal bonds is fairly large. It has been valued at close to $4 trillion. However, it is important to realize that the number of issuers in municipal bond markets is much large. Hence, there are a lot of issuers that increase the variety in the municipal bond market.
There are several types of municipal bonds. However, most investors segregate these bonds into two main categories based on the guarantee that the municipal government is providing. The categorization of municipal bonds has been mentioned below:
A large number of municipal bonds are already in circulation. Also, a very large number of bonds is issued every year. This is because of the large investor appetite for such bonds. This appetite is the result of several distinct advantages that such bonds provide. Details about the advantages of municipal bonds have been explained below:
There are certain disadvantages of investing in municipal bonds as well. These disadvantages have been listed below:
The bottom line is that municipal bonds are safe. However, they provide a very low yield. They are largely used by investors in higher tax brackets who end up getting a better yield because of the tax advantages.
Your email address will not be published. Required fields are marked *