YIELD BURNING Meaning and
Definition
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Yield burning refers to a manipulative financial practice where the underwriter of a municipal bond issue artificially inflates the bond's yield to deceive investors and illegally generate excess profits. This activity typically occurs when the yield on a municipal bond is unjustifiably increased through the acquisition of Treasury securities at artificially lower prices. The term "yield" in the context of yield burning refers to the rate of return expected by bondholders.
The practice of yield burning is considered illicit because it violates securities laws and deceives investors into purchasing the municipal bonds at an inflated price. This artificially high yield misleads investors into believing that they will receive a greater return on their investment. Consequently, the underwriter can then profit from the price difference between the Treasury securities acquired at the lower price and the municipal bonds they sell to investors at the higher price.
Yield burning is illegal in most jurisdictions due to its fraudulent nature and violation of securities regulations. It is seen as a deceptive tactic that manipulates market prices and defrauds investors. Regulators and authorities are vigilant in monitoring and prosecuting individuals and entities involved in yield burning to protect the integrity of municipal bond markets and safeguard the interests of investors.
Common Misspellings for YIELD BURNING
- tield burning
- gield burning
- hield burning
- uield burning
- 7ield burning
- 6ield burning
- yueld burning
- yjeld burning
- ykeld burning
- yoeld burning
- y9eld burning
- y8eld burning
- yiwld burning
- yisld burning
- yidld burning
- yirld burning
- yi4ld burning
- yi3ld burning
- yiekd burning
- yiepd burning
Etymology of YIELD BURNING
The term "yield burning" does not have a specific etymology as it is a technical financial term rather than a word with a distinct historical origin. It is a phrase that emerged in the field of municipal bonds and tax-exempt investments.
"Yield burning" refers to a practice where financial institutions manipulate the prices of U.S. Treasury securities in order to generate excess profits for themselves or their clients. The practice typically involves artificially reducing the yield or interest rate of certain bonds or securities in violation of IRS regulations.
The term itself likely derives from the concept of "burning" or eroding the yield of a bond, which refers to reducing the return or profit that investors expect to earn from it. However, it is important to note that "yield burning" is a specific financial term and may not have a broader etymology beyond its technical use.
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