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Writing the scale is a term used to describe the procedure of assigning prospective yields to a new issue of serial municipal bonds. A syndicate bidding on a new municipal bond issue must assign perspective interest rates to the various maturities in the issue. Longer maturities will have higher yields than the shorter maturities. The municipality will then select the syndicate who offered to sell the bonds with the lowest net interest cost.
The syndicate must determine the reoffering yield that will be offered to the investing public. This is known as writing the scale. Most general obligation municipal bonds are issued with a serial maturity that matures over a period of years. The longer-term maturities carry higher yields than the bonds that mature earlier. When the syndicate has determined the prices and yields, it will submit the bid to the issuer, along with the required good faith deposit. All competitive underwritings are done on a firm commitment basis, and the winning syndicate is required to purchase all of the bonds from the issuer, even if it can’t sell them to investors. Be on the look out for questions relating to new issue municipal bonds on your exam. Make sure you understand the issuing procedure and the role of the syndicate and selling group members. Be sure you are ready to pass your exam with our Greenlight exam money back pass guarantee.
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The Securities Institute of America, Inc.