Municipal Bond Offerings
What does municipal bond offerings
Municipal bond offerings refer to the act of
issuing municipal bonds by state, cities, towns or
municipalities. When a state, city, town or
municipality needs to raise money for a project, it can
issue bonds to the public or make municipal bond
How are municipal bond offerings done?
When a new municipal bond is to be issued,
the issuer would first obtain a "preliminary legal
opinion" which determines how the municipal bonds will be
offered. Then the terms of the offerings will be set by one of
the two methods below.
Two methods of municipal bond
Municipal bond offerings can be done in two
The first is for the issuer to arrange
or negotiate with one or a few securities firms
to underwrite the municipal bond. The bond issuer works
closely with these selected securities firms to establish
the terms of the municipal bonds such as municipal bond
interest rates and the municipal bond offering price.
Factors such as the financial needs of the issuer as well
as the condition of the market are considered.
The second way is to ask for competitive
bids. While many issuers prefer to have a working
relationship with a few particular securities firms, both
methods have their advantages.
What does a competitive bid
A competitive bid in the case of a
municipal bond offering is when interested securities firms
place bids for underwriting of the municipal bond. The
issuer then chooses and works with the securities firm with
the lowest bid to sell the bond. With a competitive bid,
price is the only factor considered whereas with
underwriting negotiations with particular securities firms
other factors are also considered.