Bond insurance : what is special about munis ?

Deskripsi

Close to 50 % of municipal bonds are prepackaged with insurance at the time of issue. We offer a tax-based rationale for the emergence of third-party insurance of tax-exempt bonds. We argue that insurance adds value as it allows a third party to become, in a probabilistic sense, an issuer of tax-exempt securities. Insurance however reduces value by eleminating the possibility of a capital tax loss. .Printed Journal