Municipal Bond Anticipation Notes, or “BANs,” are a type of investment that can be traded between investors. BANs are issued by municipalities in order to raise funds for various projects. finra sie exam The municipality will then use the funds from the sale of the BANs to pay for the project.
How does it work? Typically, the government issues these notes during periods of tight cash flow. This usually occurs when state expenses rise but there is not enough revenue coming in. During these times, the government would sell debt in the form of municipal notes to raise funds.
BANs are typically issued with maturities of one year or less. This means that they must be repaid within one year from the date of issuance. However, some BANs may have maturities of up to five years.
Investors typically purchase BANs because they offer a higher yield than other types of investments, such as Treasury Bills. BANs are also considered to be a relatively safe investment because they are backed by the municipality’s full faith and credit.
What are some types of Municipal Notes? Under the municipal note umbrella, these are just some of the common types of municipality-issued securities, namely:
- Tax Anticipation Notes
- Bond Anticipation Notes
- Grant Anticipation Notes
- Revenue Anticipation Notes
To conclude, If you are considering investing in BANs, it is important to research the municipality that is issuing the bonds. Although investing in BANs is less risky due to it being backed by the government, it is important to do your research before investing. In terms of the investment, You should also pay attention to the maturity date of the bonds, as well as the interest rate. Additionally, it is essential to consult with a financial advisor to ensure that Municipal Bond Anticipation Notes or BANs are a suitable investment for your portfolio.
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