Municipal Finance

Par Munis — Sub-Par Performance

By Andy Kalotay and Guy Davidson, January 2021

Managing Duration Extension and Negative Convexity Near Par

The Bond Buyer - October 20, 2020

Negative Convexity

Tax-neutral analytics are key to accurately measuring interest rate sensitivity of munis near par.

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You haven't heard of ratchet bonds?

The Bond Buyer - June 8, 2020

Ratchet bonds are the best debt structure for issuers that you probably never heard of. TVA issued over $1 billion of these in the late 1990s and is still reaping the savings. Read more in Andy Kalotay's Bond Buyer commentary.

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There is hidden value for investors in callable taxables

The Bond Buyer - March 4, 2020

Commentary by Andy Kalotay in The Bond Buyer uncovers the hidden value in callable taxable munis. The calls are triggered by tax-exempt rates, while the bonds' worth depends on taxable rates.

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Are taxable advance refundings leaving money on the table?

The Bond Buyer - Nov 8, 2019

Andy Kalotay's commentary in The Bond Buyer exposes inefficiencies of taxable advance refundings. By refunding too soon issuers receive considerably less than what they give up. 
 
But who benefits from the waste?

The Key Rate Durations of Municipal Bonds

The Journal of Fixed Income (Fall 2019)

By Andy Kalotay and Joel Buursma

Abstract

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Muni OS Boilerplate Headscratcher: Price is ‘Priced to the Call Date’?

The Bond Buyer - Aug 26, 2019

Andy Kalotay's commentary in The Bond Buyer exposes inaccurracy and inconsistecy in muni bond official statements.

Muni OS Boilerplate Headscratcher: Price is ‘Priced to the Call Date’?

Hedging Munis — Easier Said Than Done

The Bond Buyer - May 28, 2019

Hedging a muni portfolio which contains bonds priced close to or below par is surprisingly complicated. First, the tax-aware effective duration of such bonds is considerably longer than indicated by conventional OAS models, reflecting the market impact of taxes on price changes not captured by such models. Additionally, tax-aware KRDs may not sum up to the effective duration, and therefore may need to be adjusted to determine the appropriate hedge ratios.

Tax Optimization - Investment Selection and Tax Rate Arbitrage

The Journal of Portfolio Management 2018

Tax-exempt municipal bonds are usually held in taxable accounts. This article discusses how after-tax performance can be increased by tax-beneficial sales.
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