Fed Announces Key Pricing Details for Municipal Liquidity Facility

The Federal Reserve continues to prepare  the Municipal Liquidity Facility for purchases, including today announcing key pricing details for the program.

The new details, including the pricing table can be viewed here.

Pricing Details 

Tax-Exempt Eligible Notes:

If interest on the Eligible Notes is excluded from gross income for federal income tax purposes, pricing will be at a fixed interest rate based on a comparable maturity overnight index swap (“OIS”) rate plus the applicable spread based on the long-term rating of the security for the Eligible Notes as follows:

Rating                                       Spread (bps)

 

Taxable Eligible Notes:
If interest on the Eligible Notes is not excluded from gross income for federal income tax purposes, pricing will be at a fixed interest rate that is calculated by (i) first, adding the comparable maturity OIS rate to the spread in the above table that would apply to such Eligible Notes if the Eligible Notes were tax-exempt Eligible Notes, and (ii) second, dividing the sum calculated under clause (i) by 0.65.

Other Changes

The updated fact sheet expands the category of eligible issuers. The eligibility change broadens the number of state or local governments that can use the facility that had a qualifying credit rating on April 8, but was subsequently downgraded.

The fact sheet also provides new details for cases where a government has only one rating from credit rating firm instead of two, which is likely to help some smaller governments.

The BDA will continue to provide updates as the become available.