Michigan State Looks to Basis Swap to Reduce Interest Expense

On May 5th, 2010, posted in: Articles of Interest, Derivatives by Christopher Hunt

Tags: , ,

Comments Off

Not exactly a turn at the roullette wheel, but the University is switching from SIFMA to 67% of 1-Month LIBOR + spread  on its weekly floaters in a play to benefit from the current relationship between taxable and tax-exempt curves.  The benefits could be magnified by the potential for increases in marginal tax rates.  The projected interest expense will now be close to the fixed rate on their SIFMA swap minus the received spread on the basis swap (assuming 67% of 1M LIBOR approximates their weekly floaters). (Bloomberg)

Comments are closed.