It is an illegal practice in which underwriters add large markups on bonds to complete bond offerings.
It is an unethical and illegal practice. In this procedure, to complete municipal bond offerings inflated markups are placed on bonds. Marking up the bonds price causes yield to fall and is referred to as a burn.
The idea was to get around some aspects of US federal law doing with the amount of interest income that a municipality could earn on treasury securities. As per issues of security’s terms and conditions, the municipality cannot make more money in interest than what is paid on debt. Without striking the interest that is earned by the bond, it is possible for the bond underwriter to recognize and grasp additional revenue from the project.