TABLE V-8 'NUMBER OF BIDDERS FOR MUNICIPAL BOND ISSUES STUDIED BY TYPE AND RATING: 1964, 1965, AND 1966. a/ In the treatment of negotiated issues for some of the analysis it was assumed that there was a single bidder on these issues. This is a generally valid assumption with respect to the number of bidders, but the buyer-seller relationships are likely to be materially different for negotiated issues. For that reason, the distinction between competitive sales and negotiated sales was retained for analytical purposes. Reoffering Yields.--Reoffering yields represent the rate of return, assuming the bonds are held to maturity, to the investors. The bonds of a particular issue are generally close substitutes for innumerable other new and outstanding debt assets including time deposits, corporate stocks and bonds, and government securities, although other tax exempts are the most directly competitive. Thus the possible level of reoffering yields is tied to competition from a broad array of money market instruments. The rates that investors may secure on other market instruments in turn sets a rough lower limit to the net interest costs on new municipal bonds that must be paid by State and local governments. The relationships of the rates on revenue bonds to those on other money market instruments, however, need not be wholly fixed and inflexible. The entry of commercial banks into revenue bond underwriting would expand the distribution of such issues. In turn, the market for revenue bonds may be broadened--demand increased--with the resultant effect of lowering interest rates. The average reoffering yields on competitively sold revenue issues 9/ were consistently higher than on general obligations. (See Table V-9). The difference ranged from 15 basis points on Aa rated issues in 1966 to 26 basis points on Baa rated issues in 1964. However, for most rating 9 The sample did not include negotiated issues of both types with Aa ratings in 1964 and 1966 or with Baa rating in 1965. Data for other categories are also limited. Therefore, completeness and the validity of some over-all comparisons are limited. 59-068 O 71 pt. 2 - 24 |