Except as noted above, any other comparison is likely to give an inaccurate picture of bond pricing.  Furthermore, while many underwriters will attempt to select issues that are similar, the choice of issues
selected by the underwriter, for purposes of comparison, can be manipulated to demonstrate that their pricing was excellent (yields were lower than the prevailing market) when in fact pricing may have been inferior. 

In the following example, the two issues are not comparable because “Your City” issued Bank Qualified Bonds and is compared to a Non-Bank Qualified bond issue. 

Under the Internal Revenue Code, banks may not deduct the carrying cost of tax-exempt municipal bonds. For banks, this provision has the effect of eliminating the tax-exempt benefit of municipal bonds. An exception is included in the Code that allows banks to deduct 80% of the carrying cost of a “qualified tax-exempt obligation.”  In order for bond issue to be a qualified tax-exempt obligation the bonds must be (i) issued by a “qualified small issuer,” (ii) issued for public purposes, and (iii) designated as qualified tax-exempt obligations.  A “qualified small issuer” is (with respect to bonds issued during any calendar year) an issuer that issues no more than $10 million of tax-exempt bonds during the calendar year.  Qualified tax-exempt obligations are commonly referred to as “bank qualified bonds” and generally carry rates between 15 to 25 basis points (.15% to .25%) lower than other issues on maturities purchased by banks (generally ten years or shorter).  Accordingly, your City should have received rates (yields) at least .15% lower than City B.

Example 2 – Comparison of Your City to City C