This refers to a lost opportunity where a municipal bond issuer will assume the proceeds from debt offerings and then take that money to invest it for a specific period of time until the funds are used for a project or to repay the investors. When the money is reinvested and the issuer of the debt earns a return that is less than what must be repaid to investors, then there is a lost opportunity.
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Negative Arbitrage The opportunity lost when municipal bond issuers assume proceeds from debt offerings and then invest that money for a period of time.
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