Frequently Asked Questions on Maryland Bonds
1. How can I buy Maryland general obligation bonds?
Maryland general obligation bonds cannot be purchased directly from the State. You must purchase Maryland bonds from a broker, either during a retail sale (when the bonds are originally sold by the State) or on the secondary market (where investors sell to each other). To learn about future retail sales, periodically visit here.
2. What is the rating on Maryland's general obligation bonds?
The State of Maryland's general obligation bonds have been assigned the highest credit rating by Moody's Investors Service, Inc. (Aaa), Standard and Poor's (AAA) and Fitch Ratings, Inc. (AAA). The State of Maryland General Obligation Bonds, State and Local Facilities Loan of 2014, Second Series, sold on July 23, 2014, is Maryland's most recent bond sale to receive these ratings. More details can be found here.
3. How much does it cost to purchase Maryland general obligation bonds?
Maryland general obligation bonds are issued in denominations of $5,000 each and can be purchased in any integral multiple thereof. This is the par value of the bonds. However, depending on various market related factors, your purchase price could be at a premium or discount to the par value, meaning the purchase price could be somewhat above or somewhat below the actual par value.
4. How much interest do Maryland general obligation bonds pay?
Both the coupon rate and the yield of a bond are important when considering how much interest a bond pays. Many of Maryland's general obligation bonds are structured with a 5% annual coupon rate, though the coupon rate can vary and be higher or lower than 5%. Maryland's general obligation bonds also are usually structured so interest is paid semiannually and the coupon rate does not change and is known from the time the bonds are sold. However, the yield, or what is often thought of as the income rate of return, of a specific Maryland bond will vary depending on many different market related factors, including whether the bond is purchased at a premium, discount or par.
5. When do Maryland general obligation bonds mature?
Maryland general obligation bond issuances are normally structured with anywhere from two to 15 year maturities, so that a portion of the overall bond sale matures annually. By law, Maryland's general obligation bonds must mature within 15 years. This means that on the secondary market maturities of Maryland general obligation bonds could vary anytime from very near term to 15 years from the most recent sale.
6. What other bonds does the State issue?
In addition to Maryland general obligation bonds, State agencies also issue bonds. For instance, there are Consolidated Transportation Bonds and Bay Restoration Bonds. Proceeds from the Community Development Administration Bonds are used to make mortgage loans, primarily to first time home buyers. The Maryland Health and Higher Education Facilities Financing Authority (MHEFFA) uses bond proceeds to build hospitals and educational institutions. The University System issues bonds to finance higher education facilities. Finally, many local governments in Maryland also issue bonds. You should check with your broker about the rating of these bonds and about any special call provisions.
7. Is there more information available?
Official Statements provide valuable information on general obligation bonds that have been recently sold by the State. The Official Statements also include important financial and economic information about the State that was current at the date of the Official Statement. Official statements for Maryland general obligation bonds can be found here. You can also call the State Treasurer's Office at 410-260-7155 with any questions.
Continuing financial information for the State of Maryland general obligation bonds is available here and on the EMMA website for the Municipal Securities Rulemaking Board, where market activity related to the bonds may also be found.
The Municipal Securities Rulemaking Board (MSRB) also has an Education Center to help investors understand municipal bonds.