Public Finance Resources/Guides?
Hi all -
I was wondering if anyone knows of any great resources or guides which would help in preparation for public finance undergrad recruiting?
Even though public finance is more "niche," I was surprised by the lack of guides out there. Any guidance or sense of direction regarding what I should be focusing most on in preparation for the upcoming recruiting cycle would be extremely helpful - Thanks in advance!
bump
Public finance interviews are less technical in nature so I think if you have a strong "why", then you are already in a good spot. Basic things to know:
Key differences between Munis & Corporate Bonds (tax-exemption on interest income, characteristically lower yields, lower default rates, tend to be issued at a premium) & why these differences exist
Know what PF underwriters, financial advisors do. Also know the role of DCM & how they interact with the team doing the underwriting. (I think some banks separate them)
What makes the muni market a ~$4 trillion market? What is the appeal to investors?
Why would a muni entity issue a taxable bond if they can issue tax-exempt bonds?
What type of entity would issue a GO?
How would you evaluate the credit quality/fundamentals of a GO?
What types of entities would issue a revenue bond?
How would you evaluate the credit quality/fundamentals of a revenue bond?
Basic muni terms: General Obligation Bonds, Revenue Bonds,
Basic bond terms to know: callable bonds [make whole call provision], sinking fund, bond refunding, spreads, relationship between price & yield, ways to calculate yield (Yield to Maturity, Yield to Worst, Yield to Call, Tax Equivalent yield), new money (bond/issue),
Talking points/trends/things to ask your interviewer or discuss:
What does recent federal legislation (IIJA & IRA) and election results mean for munis (look up direct pay provision for muni electric systems)? Following passage of said legislation, is there an expectation that there will be a wave of new money projects? You can ask the same question about recent election results given that billions of dollars of muni projects were on ballots this month as well.
Muni market thoughts or expectations? What happened this year? How was issuance & refundings? Where do you think the value is in munis? (I think there was some underpriced upside in GOs this year given the strong credit fundamentals amid a deteriorating macro backdrop (Illinois upgrade, Minnesota upgrade, Chicago upgrade [this was big imo] and one or two other major ones I'm forgetting on the GO side) Also, If a fund listened to those who were saying at the top of the year to buy VRDOs, I think they would have fared pretty well this year.
How are muni entities positioned to deal with the current macro environment? What's the value proposition (for investors) of munis in this type of macro environment (think about all the info I provided about solid fundamentals and square that with where tax-equivalent yields are) You should have thoughts on these questions yourself tbh or have a picture of what's going on.
From a purely non-political point of view, how are you thinking about states like Texas (OK, WV, KY considering similar action too iirc) banning underwriters from doing business and how that ultimately affects the muni market?
Related to the previous question, ask about Disney losing its Special Tax District status and how they ultimately think that plays out.
Resources:
https://www.orrick.com/en/Practices/Public-Finance (Look at the video titled, "What's Special about Public Finance" for very good answers to the "why")
Volcker Alliance Special Briefing Series
Protip: Google, "Vanguard/Blackrock/Fidelity/Schwab/Nuveen/PIMCO/Hilltop Securities etc Municipal Bond insights/perspectives/research" and you will more than likely find monthly/quarterly market write-ups that will help you understand what's going on and what institutions look at.
I seriously can't thank you enough - This is incredibly helpful! Thank you so much, and I'll definitely make sure to hone in on my "story/why" and the the resources which you recommended. Amazing!
Petition to WSO - Info like this across different threads should be bookmarked/saved in one place so that it could be used as a reference by others in the future:)
Agreed!!
Check Mergers & Inquisitions Public Finance guide. Super helpful.
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