Bond Anticipation Note - Explained
What is a Bond Anticipation Note?
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Table of ContentsWhat is a Bond Anticipation Note?How Does a Bond Anticipation Note Work?Academic Research on Bond Anticipation Note
What is a Bond Anticipation Note?
A Bond Anticipation Note (BAN) refers to a security that is funded through the sale of long-term bonds. Bond Anticipation Notes are issued in expectation of larger future bond issues. They are short-term interest-bearing securities whose proceeds is dependent on the issuance of larger future bonds. BANs are also referred to as municipal bonds because they provide financing or funding for public projects (municipal projects). Governments, local municipalities, corporations or establishments that seek to generate funds for upcoming projects, usually public projects make use on bond anticipation notes. These types of bonds generate funds through the sale of larger but long-term securities.
How Does a Bond Anticipation Note Work?
Bond anticipation notes (BAN) are notes issued in anticipation of the issuance of larger bonds in the future. Funds generated from these bonds are used for financing public or upcoming projects. A note is a promissory debt instrument loaned by one party to another party to generate funds in a short period of time. Notes yield interest and the interest rate and repayment agreement made between the lender and the borrower are included in the note. Although, some notes might take longer time to mature, the maturity period for most notes is often less than a year. Corporations and governments issue notes to cater for urgent financial needs. An example of this type of notes is a Bond Anticipation Note (BAN). A bond anticipation note is also regarded as a municipal note or issue that burrows in expectation of a future long-term bond issue. BANs are short-term debt securities that are interest-bearing but these securities are secured by larger and future long-term bonds. Corporations or government authorities that want to urgently finance a new project or an upcoming event issue BANs. The maturity period of BANs are often less than a year, they are considered as securities with lower risks. Government or corporations can issue BANs directly or use intermediaries such as banks, brokers and other financial institutions.
Academic Research on Bond Anticipation Note
- A State Saves a City: The New York Case, Shalala, D. E., & Bellamy, C. (1976). Duke LJ, 1119.
- State and local governments as borrowers: Strategic choices and the capital market, Hildreth, W. B. (1993). Public Administration Review, 53(1), 41-49.
- Municipal Securities: Some Basic Principles and Practices, Greenberg, R. D. (1977). The Urban Lawyer, 338-363.
- Tax-exempt bonds: A description of state and local government debt, Maguire, S., & Stupak, J. M. (2001, October). Congressional Research Service, Library of Congress.
- Coping in a High Interest Rate Environment, Schloss, A. E. (1982). Public Budgeting & Finance, 2(1), 9-18.
- So You Want to Finance a Firehall-Michigan's Revised Municipal Finance Act, Piell, J. L., & Swartout, R. H. (2002). Wayne L. Rev., 48, 363.
- Creative financing techniques for water utilities, Williams, P. C. (1982). JournalAmerican Water Works Association, 74(9), 443-449.
- The federal guarantee of municipal debt: will federalism survive, Griffith, J. C. (1987). Urb. Law., 19, 583. Municipal bonds, 2011, Barnes, A. (2013). Internal Revenue Service Statistics of Income Bulletin (Spring), 112-157.
- MINUTES OF THE MEETING OF COMMITTEE ON FINANCE, Hauck, W., Achtenberg, R., Carter, H. L., Fong, K., Fortune, M., Grima, C., ... & Toney, G. O. (2009).
- Bond financing in volatile times: with balance-sheet pressures, volatile markets, and increased capital needs, capital access requires new sophistication, Gould, K. A., & Blanda, C. M. (2014). Healthcare Financial Management, 68(3), 88-93.
- Analyzing the determinants of state short-term debt issuance: does fiscal stress influence the level of short-term municipal borrowing?, Askew, E. E. (2010).