Leveraging your available options

By: Sridhar Maruvada

The reasons for closing the SLGS window, whether political or economic, are subject to the discretion of the BDP. The window has closed more frequently over the last several years because of political volleying over the national debt ceiling. During these less certain periods, issuers are forced to purchase taxable securities.

In general, SLGS rates mirror Open Market Security (OMS) rates, lagging around 5 basis points behind. The price paid for issuing tax-exempt bonds is a modest reduction in return but when SLGS are not available, issues are forced to trade the relatively low “negative arbitrage” cost for higher variance in “cost of dead time”.

DBC Finance offers several options for escrow funding and arbitrage calculations. When an escrow is subject to a yield limit, as with a tax-exempt refunding, purchasing SLGS (or zero-SLGS) is the most efficient and popular way to get the most out of escrow profit. When yield-blending

SLGS are not available, DBC Finance enables users to fund with OMS, Guaranteed Investment Certificates (GICs), or manually defined securities as needed.

If you would like more information about the DBC suite of municipal finance programs from SS&C, download our brochures, request a demonstration or email us at solution@sscinc.com.