Woman of the Year Award Sponsored by Nominate yourself or another woman in banking by Sept. 16. For questions, contact Liz DeHaven at EDeHaven@indiana.bank. The IBA Woman of the Year award celebrates a woman in banking who excels at her profession, is active in the community, and supports other females to reach their full potential – whether in banking or other fields. This is a bank-wide opportunity, with emphasis on ability to lift other women to help them succeed. Nominations are now open! 3. Market dynamics favor refinancing taxable debt with tax-exempt debt. Municipal-to-Treasury ratios, a common measure of relative value of tax-exempt municipal bonds, for most terms have fallen significantly with some nearing or reaching record lows. This has enabled some issuers to find savings by refinancing taxable BABs with tax-exempt debt despite the interest rate hikes in recent years. Further, issuers may want to reduce the risk of additional cuts in the federal subsidy by refinancing BABs with tax-exempt debt. The chart below shows the history of the subsidy cuts according to the IRS. The Municipal Securities Rulemaking Board noted in a recent brief that it has observed “a number of BABs trading in the secondary market at a significant premium to par.” Spreads have widened somewhat as these redemptions have become a more prominent issue, which indicates the market may be starting to recognize an increase present in the call risk. However, investors who own or purchase BABs at a premium price may be at risk of realizing losses due to early redemption if the issuer chooses to exercise an extraordinary redemption call option. Fortunately, today’s higher interest rate environment provides opportunities to favorably reinvest the redemption proceeds, which is rather uncommon given that redemptions are usually more frequent in falling rate scenarios. These circumstances highlight the importance of investors researching and understanding all applicable redemption provisions, particularly when purchasing municipal bonds at prices above par. This information can be found within the prospectus and should be provided on pre-purchase offering documentation as well. Dana Sparkman Senior Vice President/Municipal Analyst The Baker Group Dana@GoBaker.com Dana Sparkman, CFA, is senior vice president, municipal analyst in The Baker Group’s Financial Strategies Group. She manages a municipal credit database that covers more than 150,000 municipal bonds, providing clients with specific credit metrics essential in assessing municipal credit. The Baker Group is a Preferred Service Provider of the Indiana Bankers Association and an IBA Diamond Associate Member. DIRECTORS & SENIOR MANAGEMENT CONT. 58 HOOSIERBANKER
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