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Abstract: 

This paper compares the expected average interest costs of municipal bonds sold through competitive open auctions with the costs from other methods of competitive sales. The authors’ findings suggest that there may be considerable interest cost savings to be achieved through the use of open auctions for municipal bond sales but that, if the use of open auctions leads to additional fees to financial advisors or auction providers, such savings may be reduced. In addition, results suggest that open auctions lead to lower rates on average and that the interest cost savings are dependent upon the increased competition generated by the technique.

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Affiliations:  1: University of Connecticut; 2: University of Connecticut; 3: Connecticut Conference of Municipalities.