Municipal bonds and credit risk: land values back the bond issue STAREBEI Project – Land value finance as a tool to diminish municipality bond risk: Report I Luca Cocconcelli and Francesca Medda 1 Abstract. In United States, municipal bonds are debt obligations issued by local authorities for raising funds in order to finance a vast array of their expenditures or investment projects (Temel, 2001). These bonds may involve a third party credit support or guarantor to facilitate lower borrowing costs and improve access to the credit market (Denison, 2003; Justice and Simon, 2003). For many years, municipal bonds have made broad use of monoline guarantees because urban projects typically require long periods to reach their financial closure, thereby determining increases in credit risk and consequently in interest rates and cost of debt (EIB, 2010). Nevertheless, the recent financial crisis has seen the collapse of the insurance industry and thus the monoline guarantees (Brune and Liu, 2011). The aim of this report is to give an overview of municipal bonds, to discuss the causes of the Monoline market drop, and to suggest new methods to guarantee MB emissions. The report concludes with a summary of the main findings, suggests new way to mitigate credit risk for municipal bonds, and sets forth the direction for future works. 1 UCL QASER Lab, University College London, Gower Street, London WC1E 6BT, UK