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yield burning


an illegal method of financing municipal bonds when an underwriter overcharges state and local governments for Treasury securities that they use in "advanced refunding" of old, high-yielding municipal bond issues with new, low-yielding ones


In yield burning, since bond prices and yields move in opposite directions, when the bonds are marked up, they "burn down" the yield, which may violate federal tax rules and diminishes tax revenues.

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finance's 21st Century Lexicon
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