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 Biotech / Medical : Biotech Valuation

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To: Biomaven who wrote (38148)4/18/2012 12:01:55 AM
From: hmpaRead Replies (1) of 40275
 
The claim was that the interest rate subsidy was substantially cheaper for the Treasury.


Theoretically in an efficient non-stressed market the subsidy should exactly match the tax paid by the median bondholder. In reality, the only empirical example they had were BAB bonds that had been launched into the highly fearful and stressed muni market, and sometimes were selling at a lower yield than the actual munis thanks to the explicit U.S. guarantee, so the subsidy had been miniscule. Adding insult to injury, in normal conditions large portion of such fed-sponsored bonds will be purchased by the foreign investors (fed guarantee but higher yield than Treasuries) who will get subsidy but do not pay tax.
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