DEFINITION of 'Bond Buyer 20'

Bond Buyer 20 is a representation of municipal bond trends based on a portfolio of 20 general obligation bonds that mature in 20 years. The index is based on a survey of municipal bond traders rather than actual prices or yields. The Bond Buyer 20 is published by The Bond Buyer, a daily financial publication.

Bond Buyer 20 is also referred to as the GO 20 Index or the 20 Bond Index.

BREAKING DOWN 'Bond Buyer 20'

The Bond Buyer 20 index tracks the average yields of 20 general obligation municipal bonds. The average rating of the 20 bonds that make up the index are grade Aa2 (Moody's rating) or grade AA (Standard & Poor’s rating).

The Bond Buyer 20 index is simply a theoretical and estimated average of bond yields. It is used to determine the interest rates for a new issue of general obligation bonds. General obligation (GO) bonds are municipal bonds which have their interest and principal payment obligations funded from the state or local government’s financial coffers. These bonds are backed by the full faith and credit of the municipal government which may have the authority to increase taxes in order to fulfill its payment obligations on the GO bond. In effect, the Bond Buyer 20 index shows the trend in interest rates for GO bonds.

The average yield drawn from the index is taken from a survey of muni bond traders who are asked to estimate what a current coupon bond for each issuer in the indices would yield if the bond was sold at par value. State and local governments can use the derived yield to estimate the maximum interest rate they can offer on new issues. For example, the 2017 Florida statutes note that “government bonds may bear interest at a rate that does not exceed an average net interest cost rate, which shall be computed by adding 300 basis points to The Bond Buyer “20 Bond Index” published immediately preceding the first day of the calendar month in which the bonds are sold.”

The Bond Buyer Index provides an indication of the average weekly yield of the Bond Buyer 20 Index. The Bond Buyer Index is based on the prices of 40 recently issued and actively traded long-term municipal GO and revenue bonds calculated by The Bond Buyer, which expresses the value of the index in points and 32ds (thirty-seconds).

The Bond Buyer financial publication publishes the Bond Buyer 20 index weekly in addition to other bond indices, such as the Bond Buyer 11 Index, the Revenue Bond Index (RBI), the SIFMA index, and the Municipal Market Data (MMD) Curve. The Bond Buyer 11 Index uses a select group of 11 bonds from the Bond Buyer 20. The average rating of the 11 bonds is roughly equivalent to Moody's Aa1 and S&P's AA-plus.

  1. Bond Buyer 11

    The Bond Buyer 11 (BB11) index is a theoretical and estimated ...
  2. Obligation Bond

    A municipal bond whose face value of the bond is greater than ...
  3. The Bond Buyer

    The Bond Buyer is a trade publication for members of the municipal ...
  4. Dollar Bond

    A dollar bond is a U.S. denominated bond that trades outside ...
  5. Dollar Price

    Dollar price is a method of pricing a bond in value terms, not ...
  6. Bond Option

    A bond option is an option contract in which the underlying asset ...
Related Articles
  1. Investing

    Why Muni Bonds and Bond Funds are Perfect Together

    Municipal bonds and bond funds differ in several ways, which is partly why they complement each other well.
  2. Investing

    Corporate Bond Basics: Learn to Invest

    Understand the basics of corporate bonds to increase your chances of positive returns.
  3. 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.
  4. Investing

    The Best Bet for Retirement Income: Bonds or Bond Funds?

    Retirees seeking income from their investments typically look into bonds. Here's a look at the types of bonds, bond funds and their pros and cons.
  5. Investing

    Taxation Rules for Bond Investors

    To sum-up there are three types of bonds: government bonds, municipal bonds, and corporate bonds. Find out how each of these bonds are taxed and what you can do as an investor.
  6. Investing

    A Look at the Pros and Cons of Muni Bonds

    Considering muni bonds? Here's a look at their pros and cons.
  7. Investing

    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.
  8. Investing

    Municipal bond tips for the Series 7 exam

    Learn to distinguish between general obligation and revenue bonds to ace the municipal bonds portion of the Series 7 exam.
  9. Investing

    U.S. Corporate Bonds: The Last Safe Place to Make Money

    There aren't many other sources right now for relatively safe, steady income.
  1. Where can I buy government bonds?

    The type of bond dictates its purchase. Federal bonds are issued by the federal government, while municipal bonds are issued ... Read Answer >>
  2. What determines bond prices on the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market and why bond prices and yields ... Read Answer >>
Trading Center