Locate a U.S. municipal bond. You can use this bond screener to search for a municipal bond. Provide a description of the bond, the bond’s current yield, the bond’s yield to maturity, and the bond’s credit rating. Is the bond an investment-grade bond? How can you tell? Do you think that the bond will experience much interest rate risk? Please justify your decision.
When federal, state, and local governments issue securities, what key roles do they play in the financial markets?
How do these decisions affect you?
Yahoo! Finance. (2011). Bond screener. Retrieved from http://screener.finance.yahoo.com/bonds.html
Municipal Bond-Financial Institution Regulations
For decades and decades, governments have been known to be the controller and regulators of the money in supply through measures such as the sale and purchase of bonds. A municipal bond is one of these measures and is often offered by governments or one of their agents. Municipal bonds are often issued by governments to provide funds for public development through projects such as roads, schools, recreation facilities and infrastructures (United States, 2008). They are general commitments of the backer or secured by determined incomes. Subsequently, each civil bond has a unique yield to maturity and credit rating. This assignment will attempt to provide a description of description of T. Rowe Price Tax-Free High Yield Fund, the bond’s current yield, the bond’s yield to maturity, and the bond credit rating.
- Rowe Price Tax-Free High Yield Fund is positioned among the highest return securities in the united states as it looks for an abnormal state income excluded from government pay charges. As per statistics, no less than 80 percent of the bond’s income is exempted from the government wage charges. However, up to 20 percents of the bond’s pay could be gotten from securities subject to the option least expense. The bond weighted average maturity is expected to exceed fifteen years where dividends are declared daily but distributed monthly. Additionally, it carries an expense ratio of 0.69 and requires a minimum investment of $ 2500. The reserve has had a return of 8.22 % in the previous year, 8.41 % in the course of the last three years, 7.01 % in the course of the last five years, and 5.08 % in the course of last ten years, making it one of the best performing municipal bond in the country (U.S. News and World Report, inc, 2016). The fund has a theoretical development of $10,000 USD. Belowis a rundown of the top possessions related to this security:
|Texas Mun Gas Acquisition & Su Sr 6.25%||1.10%|
|St John Baptist Parish La Rev Rev 5.125%||1.04%|
|Tobacco Settlement Fing Corp N Asset 5%||0.97%|
|Golden St Tob Securitization C Toba 4.5%||0.94%|
|Salt Verde Finl Corp Sr Gas Re Senior 5%||0.87%|
|Alachua Cnty Fla Health Facs A Rev Bd 5%||0.84%|
|Metropolitan Pier & Exposition Bds 5.25%||0.74%|
|Buckeye Ohio Tob Settlement Fi Toba 6.5%||0.70%|
|Golden St Tob Securitization C Tobacco S||0.69%|
|Liberty N Y Dev Corp Rev Rev Bds 5.25%||0.63%|
Moreover, research shows that the bond experiences lower risks compared to other kind of bonds as the following table shows. The security will experience a short term interest rate risk because of the past election, which caused instability in the financial market. Normally amid national election, there is instability in security markets, and this would influence this municipal security (“Tax-Equivalent Yield,” n.d). It is anticipated that this bond will keep on showing development in the market and its performance will continue to grow in the long-run.
Roles of Government in Financial Market
At the point when the government puts securities in the financial market, it gives financial specialists and Americans a chance to invest in a sure and well-paying bond compared to other types of securities if they invest wisely. The sale of this bond in the market would influence the entire financial market, increasing competition and in the process giving me an opportunity to invest in a favorable security. Government securities are always favored, owing to their high returns.
Tax-Equivalent Yield. (n.d.). SpringerReference. doi:10.1007/springerreference_2666
U.S. News & World Report, inc. (2016). Best graduate schools: Law, business, education, engineering, medicine, nursing and more. Washington, DC: U.S. News & World Report.
United States. (2008). Municipal Bond Fairness Act: Report (to accompany H.R. 6308) (including cost estimate of the Congressional Budget Office). Washington, D.C.: U.S. G.P.O.