municipal convertible

municipal convertible

A unique municipal bond that is issued at a large discount from face value because it pays no interest until a specified date, at which time interest payments begin and continue until maturity. For example, a bond issued in 1988 and due in 2015 might begin paying interest in 1998. Essentially, a municipal convertible is a combination of a zero-coupon bond and an ordinary interest-paying bond. Municipal convertibles are traded under a variety of acronyms including BIGS, CCAB, FIGS, GAINS, PACS, STAIRS^® , and TEDIS, depending upon the underwriter of the particular issue.