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InvestHub.com's
Finance Dictionary and Glossary of Investment Terms

yield burning  

Definition 1.

An illegal practice in which an underwriter places excessive markups on bonds used to complete some types of municipal bond offerings. By marking up the price, the yield will fall, which is known as "burning" the yield.
 

Definition 2.

A municipal bond financing method. Underwriters in advance refundings add large markups on U.S. Treasury bonds bought and held in escrow to compensate investors while waiting for repayment of old bonds after issuance of the new bonds. 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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