1811 Bethlehem Pike
Flourtown Commons, Suite 350
Flourtown, Pennsylvania 19031
Telephone: 215-402-0270
[email protected]
Delaware Valley Regional Finance Authority (“DelVal”)
June 23, 2017
Long-term interest rates decreased approximately 0.25% over the past month. For the
first time since the elections this past November, long-term rates have fallen and stayed below
2.50%. Despite the 0.25% interest rate hike by the Federal Reserve this month, interest rates
across the yield curve have stayed at around their lowest point since the November elections.
Short-term tax-exempt rates remain high relative to taxable rates; short-term tax-exempt rates
should continue to decline.
DelVal Loan Rates for the Past Year, Level Debt Amortization
3.00%
2.75%
20-year maturity,
fixed rate, 10 year
option
2.50%
15-year maturity,
fixed rate, 7 year
option
2.25%
10-year maturity,
fixed rate, no
option
2.00%
1.75%
5-year maturity,
fixed rate, no
option
1.50%
Variable loan rate
1.25%
1.00%
0.75%
Loan Option
Past
Year
20-year maturity, fixed rate, 10 year option
15-year maturity, fixed rate, 7 year option
10-year maturity, fixed rate, no option
5-year maturity, fixed rate, no option
Variable rate loan
2.31%
2.14%
1.85%
1.59%
1.41%
Average Rate
Past
Past
6-Months 3-Months
2.59%
2.41%
2.12%
1.82%
1.45%
Source: Calhoun Baker Inc.
2.53%
2.35%
2.07%
1.79%
1.53%
Rate as of
22-Jun-17
2.380%
2.215%
1.940%
1.684%
1.570%
Performance of the average bond issue in DelVal’s market area improved markedly in
April, principally due to large issues by “AAA” credits and shorter average maturities. Following
this improvement, the market area experienced a reversion to the mean with regards to
performance in May. A comparison of the All-In True Interest Costs (the “All-In TIC”) for a 20year level debt structure, among a DelVal Loan, “AAA” General Obligation Bond issue (the
“AAA Bond”), and the average bond issue in the DelVal Market Area (the “Average Bond”) is
shown in the chart below. The calculations of All-In TIC incorporate all costs of issuance and
interest payments. The All-In TIC of the Average Bond is based on the actual sales, calculated
monthly. The interest rates of the AAA Bond are based on the published Bloomberg AAA
General Obligation Bond Indices (the “AAA Indices”). The DelVal Loan rates are based on
actual end-of-day rates and include the price of a 5-year option.
All-In True Interest Cost, 20-Year Maturity, Level Debt Amortization
4.00%
3.75%
Average Bond Issue in DelVal
Market Area (5-year option)
3.50%
Bloomberg AAA General Obligation
Bond Indices (no option)
3.25%
DelVal Loan (5-year option)
3.00%
2.75%
2.50%
2.25%
2.00%
1.75%
1.50%
24-Jun-16
24-Jul-16
23-Aug-16
22-Sep-16
22-Oct-16
21-Nov-16
Average par amount
Number of issues
Average par amount
Weighted average rating
Weighted average maturity (years)
Weighted average underwriting fee
Weighted average other costs of issuance
Weighted average All-In True Interest Cost over (under):
Bloomberg AAA General Obligation Bond indices
Comparable DelVal Loan
21-Dec-16
20-Jan-17
19-Feb-17
21-Mar-17
20-Apr-17
20-May-17
19-Jun-17
March
12
$ 21,869,583
AA
12.09
0.853%
0.552%
April
7
$ 18,064,286
AA+
7.73
0.469%
0.618%
May*
9
$ 24,950,556
AA+
10.93
0.624%
0.617%
Past Year
103
$ 18,090,825
AA
10.59
0.655%
0.586%
0.687%
0.600%
0.477%
0.213%
0.688%
0.465%
0.725%
0.580%
*Preliminary, all official statements have not yet been posted.
Source: Calhoun Baker Inc.
2
A chart of the annual average variable loan rates since 1999 is shown below. Rates spiked
to 8.36% in 2008 in the wake of the financial meltdown, but the average rate for the year was
2.65%. The variable rate is reset weekly. Historically, tax-exempt money market funds have
been the principal purchasers of variable rate debt, but this relationship has changed due to new
Dodd-Frank regulations. Increasingly, taxable money market funds and taxable and tax-exempt
intermediate-term bond funds have been purchasing the variable rate debt. The variable rate
spikes around Christmas and April 15 due to seasonal outflows from money market and bond
funds and around September 30 due to the “window dressing” for fiscal year-end financial
statements of financial institutions.
Annual Average Variable Loan Rate since 1999
Average variable loan rate since 1999:
Average rate for the past year:
Current variable rate:
Source: Calhoun Baker Inc.
3
2.00%
1.41%
1.57%