New England Property and Casualty

New England Property and Casualty 1). What factors influence the submit for municipal debt? develop the steep positive slope of the municipal fork up coil. The primary feather factors affecting regard for municipal bonds be interest array volatility, valuees, and relatively low levels of default. Municipal bonds had traditionally been considered an effective castment vehicle for property casualty insurance companies and for individuals in graduate(prenominal) fedearned run averagel tax brackets. For that reason, face value reelects on muni bonds are slackly below those of Treasuries given the net premium after-tax considerations. At the time of the case, the top b strayline federal income tax degree was over 50% (not including state and local taxes). In the geezerhood leading up to the case, both interest rates and the marginal tax rate had been very volatile. The top marginal tax rate at the time the portfolio had been purchased was 70%, it then fur to 50% and was scheduled to drop further in the sexual climax years. Ratings are also a factor influencing the demand for municipal debt. Ratings are affected by issuing municipalitys scotch base, debt history, future capital requirements, etc. High ratings usually march the professionalism of a municipalitys administration and the quality of its control systems.

Investors era of liabilities and regulatory restriction on the quality of securities in which they could localise also influence the demand for municipal debt. Commercial banks broadly speaking purchased dead- to intermediate-term, general ob ligation municipal bonds. Property and casua! lty companies deport the long term municipal bonds, exhibiting a preference for higher-yielding tax revenue enhancement bonds. [pic][pic] The steep positive slope of the muni bond yield curve at the time of the case reflects high demand for mulct term muni bonds and decreased demand for LT munis requiring greater yields. This reflects marketplace sectionalisation exhibiting a deep market with high investor demand for short term...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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