In the current market, debt service reserve funds create negative arbitrage for issuers due to the difference in available investment rates for the reserve fund and the borrowing rates of the bond transaction. On the other hand, a debt service reserve fund may benefit the issuer by creating more investor

In past newsletters, we’ve often discussed the impact of an inverted yield curve environment on refunding escrows. Specifically, we’ve explained in detail the idiosyncrasies caused by an inverted yield curve that led to State and Local Government Series (SLGS) escrows outperforming open market securities (OMS) escrows (Comparing SLGS and OMS

Prior to the financial crisis, long-term interest rates were significantly higher than where they are currently.  The graph below shows the decline of the 20-year LIBOR swap rate (as a proxy for long-term interest rates) since January 2007. A sharp decline in rates occurred early this year, creating all-time low rates.

There continues to be a disparity in the current market between pre-refunded municipal bonds and Treasury securities. Most escrows that were established at some point over the last several years contain either State and Local Government Securities (SLGS) or Open Market Securities (OMS) that have appreciated in value substantially due to

It is typical for issuers with an upcoming refunding transaction to engage an escrow bidding agent. The role of a bidding agent usually consists of soliciting bids for open market securities (“OMS”) with the award being contingent on these securities providing a benefit compared to State and Local Government Securities (“SLGS”)

As many of you are aware, interest rates on US Treasury securities have recently fallen significantly. Interestingly, at the same time, interest rates on municipal securities, including pre-refunded bonds (which are typically backed by US Treasuries), have risen substantially as shown in the chart below. This has created a unique

Many issuers with outstanding variable rate demand bonds (“VRDBs”) have been closely tracking the SIFMA index in recent weeks, due to increased market volatility. On March 18th, the weekly SIFMA index reset more than 390 basis points higher than the previous week’s reset, and then decreased by 49, 288, and

At Blue Rose, we’re often asked about the usage of Guaranteed Investment Contracts (“GICs”) and the trade-off between risk and return. Utilizing a GIC as opposed to a Repurchase Agreement (“Repo”) for the reinvestment of bond proceeds can result in a higher yield of approximately 25 basis points, depending on

Blue Rose recently has seen many issuers contemplate whether to reinvest their bond proceeds in a money-market fund or a laddered portfolio. A money-market fund offers a short-term variable rate that, in the current inverted yield curve environment, is often higher than the long-term fixed rate offered by a laddered

Generally, in a positively sloped yield curve environment, issuers benefit from investing the bond proceeds in their project funds by purchasing investments with a longer duration that offer a higher yield when compared with money market funds or other short duration instruments. In this manner, project funds are typically invested