| Advance Refunding | |
 1. A bond issuance used to pay off another outstanding bond. The new bond will often be issued at a lower rate than the older outstanding bond. 2. A bond issuance in which new bonds are sold at a lower rate than outstanding ones. The proceeds are then invested, and when the older bonds become callable they are paid off with the invested proceeds. |
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 1. Advance refunding is most often used by governments seeking to postpone their debt payments to the future instead of having to pay off a large amount of debt in the present. 2. Municipal bonds are traditionally exempt from federal tax, but if a municipal bond is issued in an advance refunding it is no longer tax exempt. This is because municipal bonds tend to have lower rates, and municipalities could potentially use advance refunding to issue unlimited amounts of debt at low rates and invest in higher rate investments. |
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 Bond Basics Tutorial - What are bonds and do they belong in your portfolio? Get all the answers in this comprehensive tutorial. Advanced Bond Concepts - This detailed tutorial explains some of the more complex concepts and calculations you need to know for trading bonds, including bond pricing, yield, term structure of interest rates, duration, and much more. The Basics of Municipal Bonds - These notes may offer a tax-free income stream but they are not without risks. Weighing the Tax Benefits of Municipal Securities - Find out how to determine whether the tax exemption offered by "munis" benefits you. |
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