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AN EXAMINATION OF THE YIELD SPREAD BETWEEN INSURED AND UNINSURED DEBT
Author(s) -
Hsueh L. Paul,
Chandy P. R.
Publication year - 1989
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1989.tb00516.x
Subject(s) - bond , credit spread (options) , municipal bond , yield (engineering) , debt , credit rating , business , default , bond credit rating , bond market , financial system , actuarial science , credit risk , monetary economics , economics , finance , materials science , credit reference , metallurgy
Currently, municipal bonds insured by major insurance firms receive the highest credit rating from rating agencies. The interest rates on regular triple‐A municipal bonds, however, have been persistently below those of insured bond issues. The yield spread between insured and uninsured triple‐A bonds in the tax‐exempt market is examined here, and it is shown that the yield spread may be attributable to split ratings and default‐related risks.