Insured bond

Insured bond

A municipal bond backed both by the credit of the municipal issuer and by commercial insurance policies.

Insured Bond

A municipal bond on which payment is guaranteed by a bond insurance company, especially one with a high credit rating. An insured bond is doubly protected because it is guaranteed by both the revenues from the issuing municipality itself and by the bond insurer in case the issuer defaults. As such, an insured bond is very low risk, and therefore usually carries a lower coupon rate than an uninsured bond.

insured bond

A municipal debt obligation for which interest and principal are guaranteed by a private insurance company. Municipal issuers pay a premium to purchase the insurance in order to obtain a higher credit quality rating and a lower rate of interest on the debt.

Insured bond.

An insured bond is a municipal bond whose interest and principal payments are guaranteed by a triple-A rated bond insurer.

Insurance protects municipal bondholders against default by the issuer and protects bonds in case they're downgraded by ratings agencies, which can decrease market value.

Insured bonds generally offer a slightly lower rate of interest than uninsured bonds.

References in periodicals archive ?
Why would you accept the same yield on a Puerto Rican insured bond as on Florida insured bond?
This $353 million default on an insured bond issue increased uncertainty in the municipal bond markets and caused insurers to tighten their bond quality underwriting standards for healthcare issues (Carpenter et al.
Interest savings can be determined by subtracting the average yield for a bond for a given credit rating and maturity from that of an insured bond of the same maturity.
Hsueh and Liu's hypothesis is: "If the intrinsic default risk of an insured bond is still priced by investors, the null hypothesis that complete bond insurance acts as a valid signal in the municipal bond market is rejected".
It has also foraged in the realm of double-A rated bonds, which are one rank below triple-A and produce lower premiums than the typical insured bond, which is in the range of single-A to triple-B.
The underlying probability of default on insured bond issues does not go away with the purchase of complete insurance coverage -- it simple shifts to the insurer who has its own default risk.
I think that the premium is large for an insured bond,'' said William Fitzgerald, a portfolio manager at John Nuveen & Co.
While insured bonds accounted for more than half of the market in 2005, just 4 percent of muni issues were insured in the first half of 2012.
The new policy offers issuers the ability to achieve higher foreign currency ratings from ratings agencies on the insured bonds offerings.
One alternative involves placing the money into AAA-rated insured bonds producing tax-exempt interest of 7%, while the other alternative is the purchase of GNMA bonds producing taxable interest of 9.
The safest municipals are insured bonds, those backed by one of several AAA-rated insurance companies.
To avoid being a victim, look for insured bonds, backed by one of several AAA-rated insurance companies, such as Ambac Indemnity Corp.