A bond issued by a municipality to take advantage of a disparity in interest rates between two different debt instruments. For example, a municipality issues an arbitrage bond at a lower interest rate and for a shorter term than one of its own existing debt securities. It then might use the assets raised by the arbitrage issue to buy Treasury securities that are paying a higher interest rate than its own issue. Prior to maturity of its own higher-rate issue, the municipality will sell the Treasury securities and pay off the debt on the arbitrage bond, profiting from the difference.
Browse by Subjects
market if touched (MIT)
sales, general & administration (SG&A)
American Psychological Association (APA):
Chicago Manual of Style (CMS):
Modern Language Association (MLA):