.png)
February 18, 2025 | Georgina Walleshauser, Vice President
Yield Curve Normalization and Refunding Escrows
The yield curve has significantly normalized in the past several months. We’ve discussed how the shape of the yield curve can impact reinvestment decisions in previous articles (such as “The Slope of the Yield Curve and How it Affects Refunding Escrows”) and now, as a result of the normalization in the current market, we are seeing more and more instances where open market securities (“OMS”) are outperforming State and Local Government Series Securities (“SLGS”).
OMS vs. SLGS
For escrows and funds that are allowed to be funded with SLGS, we at Blue Rose can undertake an early assessment of the potential advantage of using OMS vs. SLGS. We can provide this analysis at no cost and with no further obligation for issuers. Furthermore, if OMS do not provide a benefit to SLGS on the day of bidding, issuers still can subscribe for SLGS. The subscription lead time for SLGS under $10M is five (5) calendar days, and for SLGS purchases over $10M is seven (7) calendar days. As long as the bid date is set up at least seven calendar days prior to closing (or five calendar days for purchases under $10M), there is little to no consequence for the issuer to take bids for OMS.
SLGS are currently available for purchase and were not suspended as part of the extraordinary measures taken after the debt limit was reached last month. However, there is a possibility that SLGS may still be suspended to prevent the U.S. government from reaching its debt ceiling. We will continue to monitor the availability of SLGS and release a special announcement if the SLGS window closes. If this happens, it will be beneficial for issuers preparing to go to market with a refunding transaction to have an OMS bid set up in advance.
We encourage you to reach out to your Blue Rose advisor for an indicative escrow cash flow analysis and to learn more about our bidding agent services for your escrow transactions and reinvestment of bond proceeds.
Georgina Walleshauser, Vice President | 952-746-6036
In her role of Vice President, Georgina Walleshauser manages a number of the firm’s clients, providing them with advice on and ensuring a smooth closing for all types of debt and derivative product transactions, capital planning solutions, and detailed credit assessments. Ms. Walleshauser serves as an advisor to public and private higher education, non-profit and governmental institutions. She specializes in analyzing and assessing reinvestment strategies for clients, leading most of Blue Rose’s reinvestment transactions. Ms. Walleshauser 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. She joined Blue Rose in 2017 as a Junior Quantitative Analyst.
Media Contact:
Laura Klingelhutz, Marketing Coordinator
952-208-5710
Comments