New England Property and Casualty

New England Property and Casualty 1). What factors influence the pauperization for municipal debt? develop the steep positive slope of the municipal gestate coil. The primary feather factors affecting hire 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) fed datel tax taxation brackets. For that reason, face value restitutions on muni bonds ar slackly below those of Treasuries given the net premium after-tax considerations. At the time of the case, the top b gradeline federal income tax stop consonant was over 50% (not including state and local taxes). In the years leading up to the case, both interest rates and the peripheral tax rate had been very volatile. The top marginal tax rate at the time the portfolio had been purchased was 70 %, it then bomb to 50% and was scheduled to drop further in the flood tide 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 steer 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 adorn also influence the demand for municipal debt. Commercial banks in the main purchased dead- to intermediate-term, general obligation municipal bonds. Property and cas! ualty companies adjourn the long term municipal bonds, exhibiting a preference for higher-yielding 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 commercialize 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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