Oregon State Treasury


Frequently Asked Questions

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What does it mean when an Oregon bond is tax-exempt? 

"Tax-exempt" means the interest that an Oregon investor earns on a bond is exempt from both federal income taxes and State personal income taxes. The interest paid on all State of Oregon bonds is exempt from State of Oregon personal income tax, but not all State of Oregon bonds are exempt from federal income tax. The bonds that are taxable under the federal tax code are clearly identified as "Taxable" bonds in the official statement. See "What is a taxable bond" below. For additional information about the tax status of specific bonds, read the "Tax Matters" section of the official statement of a particular bond offering. State Agency official statements may be obtained from your broker, by visiting www.BuyOregonBonds.com, or by calling the Debt Management Division at (503) 378-4930.

What is a taxable bond?

Given the nature of some of the programs funded by State of Oregon bonds, the interest on certain bonds may not meet the Federal tax rules to qualify for exemption from federal income taxes. Please read the "Tax Matters" section of the official statement for the bond sale to learn about the bonds' tax status. State agency official statements may be obtained from your broker, by visiting www.BuyOregonBonds.com, or by calling the Debt Management Division at (503) 378-4930.

What are some benefits of purchasing municipal bonds? 

Municipal bonds may be an important part of a diversified investment portfolio, as municipal bonds typically have a predictable stream of payments of principal and interest. Investors often purchase municipal bonds to preserve and increase capital, or to receive dependable interest income. Additionally, since the interest earned on municipal bonds is typically exempt from federal and state income taxes high tax bracket bond owners may receive higher after tax yields than on taxable bonds.

What is a State of Oregon General Obligation (GO) bond? 

When an investor buys a GO bond issued by the State of Oregon, the investor is making a loan to the State. GO bonds are backed by the full faith and credit of the State of Oregon. A GO bond is secured by the power to levy unlimited additional property taxes to pay off the bond. The State uses the money borrowed for a variety of purposes including building college and university classrooms and dorms, funding veteran's mortgages and financing small scale energy projects.

What is a State of Oregon Revenue Bond?  

Revenue bonds are a form of long-term borrowing State agencies use to finance State programs and projects that are self-supporting through various non-General Fund revenues. Examples include the revenue bonds issued for a first-time homebuyers' mortgage program, highway construction and bridge projects. Most often, the income generated by the program or project goes toward meeting debt service on the bonds (i.e., paying principal and interest to bondholders). Unlike GO bonds, revenue bonds are not backed by the State's full faith and credit, but rather through the revenues pledged to bondholders.

What is the State of Oregon's credit rating? 

The State of Oregon 's General Obligation Bonds, are rated AA+, Aa1, and AA+ by Fitch Ratings, Moody's Investors Service, and Standard & Poor's respectively. Other State of Oregon bond types may have different credit ratings. Please see the Calendar of Oregon Bond Sales, or the Official Statement for the current ratings for a particular State of Oregon bond offering.

How safe are municipal bonds?

Generally, the safety of a series of municipal bonds is measured by its credit ratings. For example, the State of Oregon's General Obligation bonds have relatively high credit ratings, reflecting the State's strong financial management and the fact that these bonds are backed by the full faith and credit pledge of the State of Oregon. The State of Oregon has never defaulted on any bond that it has pledged to repay from State moneys.
  • Interest Rate - The interest rate determines the amount of interest paid to investors in exchange for the use of their loaned money. This rate is a percentage of the "principal", (amount borrowed), that accrues over a specified period of time. For fixed rate bonds, interest is usually compounded and paid every six months.
  • Price - The price is the amount for which the investor purchases the bond, i.e. the cost of the bond. This cost is based on variables such as the years until maturity (see Maturity below), current market yields, quality of the credit (rating), and the tax status of the bond. Please note that price and yields move in opposite directions. As yields increase, the price of the bond decreases and vice-versa. 
  • Yield - The yield is the return an investor earns on the bond. The yield is based on the market price and coupon interest rate and can be based on a number of factors such as maturity date and the time between interest payments. Investors should consult their broker to learn more about yield. 
  • Maturity - This is the date when the principal owed to the investor becomes due. The State of Oregon generally sells bonds with maturities between 1 and 30 years. Also, it is important to note that the longer the maturity, typically the higher the yield. 
  • Redemption Provisions - Some bonds may contain provisions that allow the State of Oregon to redeem, or "call," all or a portion of the bonds, at set prices, prior to their maturity dates. Bonds are frequently called when current market interest rates are substantially lower than when the originally sold. Bonds with redemption provisions usually have higher yields to compensate for the risk that the bonds might be called early. When a bond is called, the investor is paid the principal amount and any interest earned since the last interest payment. However, the investor does not receive the interest that would have been earned if the bond had been allowed to reach its maturity date. Investors are notified of impending calls. Investors can find out if their State bond has been called by contacting their broker.
  • Creditworthiness - Most municipal bonds are rated by one or more of the three major rating agencies, which are: Fitch Ratings, Moody's Investors Service, and Standard & Poor's. A credit rating is an independent assessment of the creditworthiness of the bonds by one of the aforementioned rating agencies. The creditworthiness of a bond is a measure of the probability of the timely repayment of principal and interest of a bond. A higher credit rating indicates the rating agency's view that there is a greater probability the investment will be repaid, both in full and on time.   

What yield will I receive on my bonds? 

The yields vary from bond sale to bond sale, and depends on the maturity of the bond that you own, the credit rating and other factors described elsewhere. For specific information regarding yields, please contact your broker.

What if I want to sell my municipal bonds prior to maturity?  

Most municipal securities may be sold prior to maturity through a brokerage firm. If an investor sells a municipal security prior to maturity, the price that investor will receive depends on current market interest rates, supply relative to demand, perceived credit quality of the securities, as well as other variables. Investors should also consult a tax advisor for any tax implications.

What is the difference between buying municipal bonds in the primary and secondary market? 

When the State sells a bond, it is referred to as a new issue primary market sale. In a new issue, all of the terms are set, including the price and interest rates, and the securities are sold to investors, with the issuer receiving the proceeds of the sale. The initial sales commission paid to broker-dealers is paid by the issuer, such as the State of Oregon, from the proceeds. A retail investor who would like to participate in a primary market transaction must have an account with a brokerage firm serving as a manager or selling group member for the sale. A secondary market transaction does not involve the State, but is a transaction between two investors, both a buyer and a seller. These transactions involve a brokerage firm which acts either as a liaison between the buyer and seller, or as a buyer or seller itself. Buyers pay sales commissions to brokerage firms to compensate them for their services in facilitating the transaction. Current market interest rates, supply relative to demand, perceived credit quality of the securities, as well as other variables, influence the price of the bonds.

Why doesn't my broker have a particular bond series for sale, even though they are a member of the selling group?  

No firm is guaranteed to have bonds available from a particular sale. If investor demand is high other bond purchasers may be "filled" (receive their bond orders) prior to your order. To improve your chances of being filled for a bond order let your broker know early of your interest and willingness to purchase a bond.

Where can I find information regarding the State's upcoming bond sales?  

Information is available at the Calendar of Oregon Bond Sales, on the BuyOregonBonds.com website.

Where can I find information about Local Government bond sales?  

Please note that while the Office of the State Treasurer Debt Management Division tracks most Oregon local government bond sales, specific information is best obtained through your broker or by directly contacting the municipality. The State does not manage local government bond sales.