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Basis Points – Market Update August 2023

Fitch Ratings downgraded the United States’ long-term debt from AAA to AA+ on August 1st. This is the first rating downgrade the United States has faced in over a decade since S&P downgraded its credit rating from AAA to AA+ in August 2011. Both Moody’s and Kroll continue to hold a ‘AAA’ level rating equivalent for the United States.

 
While the most recent downgrade from Fitch has had little impact on the overall market, a continued deterioration of U.S. credit ratings could potentially have some consequences for certain municipal issuers holding treasury and agency securities within their investment portfolios.
 
Each state has their own version of a public funds investment act which authorizes certain types of investments and securities for municipal bond funds. Additionally, many issuers and borrowers are further limited by their own specific Bond Indenture, Trust Agreement, and/or internal investment policy. The language in these documents will vary; however, if there are any references to rating requirements for specific securities it will be important to review such documents to ensure they don’t require more than one rating of ‘AAA’ rating level equivalent for treasury or agency securities.
 
For tax-exempt borrowers who are coming to market with new money issuances or have outstanding unspent bond proceeds, now continues to be an excellent time to consider the most efficient reinvestment options. Below we show current reinvestment rate indications. As always, we encourage you to reach out to your Blue Rose advisor for a reinvestment indication tailored to your specific funds and to discuss the risks and benefits of each type of reinvestment structure.
Average Life
GIC
Repo
Portfolio
1-year
5.40%
4.40%
5.25%
2-year
4.90%
4.10%
4.80%
3-year
4.60%
4.50%

Georgina Walleshauser, Vice President | 952-746-6036

 

Georgina Walleshauser joined Blue Rose in 2017 as a Junior Quantitative Analyst. She has vast expertise in providing modeling, analytics, market data, and research in support of the delivery of capital planning, debt and derivatives advisory, and reinvestment services to our clients. As Vice President, she manages a number of the firm’s clients and ensures that transactions run smoothly through closing. She specializes in analyzing and assessing reinvestment strategies for clients, leading many of Blue Rose’s reinvestment transactions.

 

Media Contact:

Megan Roth, Marketing Manager

952-746-6056

[email protected]

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Blue Rose Capital Advisors is an independent financial advisory firm that does not engage in underwriting activities. We are registered with the Securities and Exchange Commission (SEC) and Municipal Securities Rulemaking Board (MSRB) as a Municipal Advisor. Because we have not engaged in underwriting activities in our history, we generally qualify as an Independent Registered Municipal Advisor (IRMA).

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