DEFINITION of 'Anticipation Note'

A short-term obligation that is issued for temporary financing needs by a municipality. The principal payoff may be covered by a future longer-term bond issue, taxes or other form of revenue. These notes normally have maturities of one year or less and interest is payable at maturity rather than semi-annually.

BREAKING DOWN 'Anticipation Note'

Anticipation notes are used to meet the short-term cash flow needs of cities or states and provide a way to manage the timing mismatch between their revenues and expenses. There are four different types of anticipation notes:

1. Tax anticipation notes (TANs), used in anticipation of future tax collections
2. Revenue anticipation notes (RANs), issued with the anticipation that non-tax revenue (such as state aid) will pay the debt
3. Tax and revenue anticipation notes (TRANs), which are paid off with a combination of taxes and revenue
4. Bond anticipation notes (BANs), which function as bridge loans and are issued when the municipality expects a future longer-term bond issuance to pay off the note at maturity

RELATED TERMS
  1. Tax Anticipation Note - TAN

    A short-term debt security issued by a state or local government ...
  2. Bond Anticipation Note - BAN

    A short-term interest-bearing security issued in advance of a ...
  3. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  4. Revenue Bond

    A municipal bond supported by the revenue from a specific project, ...
  5. Construction Loan Note - CLN

    A short-term obligation in the form of a note, used for the funding ...
  6. Flower Bond

    Fixed income products that were originally purchased by investors ...
Related Articles
  1. Investing

    Do Municipal Bond Mutual Funds Offer a Tax Incentive?

    Learn about individual municipal securities and municipal bond funds, whose principal stability and tax-free yield appeal to high-income investors.
  2. Investing

    The Basics Of Municipal Bonds

    Investing in these bonds may offer a tax-free income stream but they are not without risks.
  3. Investing

    The Differences Between Bills, Notes And Bonds

    Treasury bills, notes and bonds are all marketable securities sold by the U.S. government to pay off debts and to raise cash.
  4. Investing

    Municipal Bond Tips For The Series 7 Exam

    Learn to distinguish between general obligation and revenue bonds to ace this test.
  5. Investing

    Taxation Rules For Bond Investors

    Several factors affect the taxable interest that must be reported. Learn more here.
  6. Investing

    5 Reasons to Invest in Municipal Bonds When the Fed Hikes Rates

    Discover five reasons why investing in municipal bonds after the Fed hikes interest rates, and not before, can be a great way to boost investment income.
  7. Investing

    4 Tax-Free Muni Bond ETFs to Consider

    Tax free municipal bond ETFs are an excellent way to build wealth slowly. Here are 4 you should consider.
  8. Investing

    A Look at the Pros and Cons of Muni Bonds

    Considering muni bonds? Here's a look at their pros and cons.
  9. Financial Advisor

    Muni Bonds, Taxable Bonds or CDs: Which is Best?

    Here's how to tell if municipal bonds are a better investment than taxable bonds or CDs.
RELATED FAQS
  1. What's the difference between bills, notes and bonds?

    Treasury bills (T-Bills), notes and bonds are marketable securities the U.S. government sells in order to pay off maturing ... Read Answer >>
  2. What do cities do with the funds generated from municipal bonds?

    Learn more about municipal bonds, including the various types of bonds issued and the purposes of municipal bond funds, such ... Read Answer >>
  3. Who or what is backing municipal bonds?

    Learn about the basics of municipal bonds, including the various revenue sources that are utilized to back or secure municipal ... Read Answer >>
  4. How are municipal bonds taxed?

    Discover information about trading municipal bonds, specifically the various tax implications municipal bonds have at state ... Read Answer >>
  5. How do the returns on municipal bonds compare to those of other bonds?

    Learn how tax-free municipal bonds may provide better returns than other types of bonds, and understand the risks of municipal ... Read Answer >>
  6. What is a triple tax-free municipal bond?

    At its core, a triple tax-free municipal bond is just like any corporate bond: it is a debt instrument, a loan given to a ... Read Answer >>
Hot Definitions
  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  2. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  3. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  4. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  5. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  6. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
Trading Center