Yield Curves and Benchmarks
While the municipal securities market is composed of unique bond issues, each with its own specific structural characteristics, ratings and yields, market indicators provide sector-specific or broad market information about the general level of municipal interest rates. These indicators include indices, benchmarks and yield curves.
Municipal securities issuers and investors may use these indicators to assist in the evaluation of a unique bond’s yield or its performance relative to a particular sector or the market as a whole. Indices, yield curves and benchmarks often are used by underwriters as a factor when determining the yield levels at which a new issue of municipal securities will be offered to investors.
The following educational publications provide more information on yield curves, indices and benchmarks.
- Understanding Yield Curves and Indices on EMMA
This document describes the municipal market yield curves and indices available on the MSRB’s Electronic Municipal Market Access (EMMA®) website.
- Understanding Municipal Market Yield Curves, Indices and Benchmarks
This document provides an overview and description of commonly used indicators in the municipal securities market.
In 2014, the Financial Stability Oversight Council (FSOC) recommended that U.S. regulators identify an alternative benchmark rate to the London Interbank Offered Rate (LIBOR), which represents the average rate at which a leading bank can obtain unsecured funding in the London interbank market. That year, the U.S. Federal Reserve created the Alternative Reference Rates Committee (ARRC) to evaluate potential alternatives for the U.S dollar LIBOR benchmark. The ARRC has identified the Secured Overnight Financing Rate (SOFR) as the rate that represents best practice for use in certain new U.S. dollar derivatives and other financial contracts.
The ARRC provides resources and recommendations to facilitate an orderly transition from LIBOR, including principles for fallback contract language. Learn more about the ARRC
The SOFR rate is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities. It is published daily by the Federal Reserve Bank of New York. Access information and daily rate data for SOFR
On December 7, 2021, the Securities and Exchange Commission (SEC) released a staff statement on LIBOR transition and key considerations for market participants.
On January 8, 2021, the SEC Office of Municipal Securities released a staff statement on the LIBOR transition in the municipal securities market.
The MSRB published information regarding the LIBOR reference rate and encouraged regulated entities to review their activities related to LIBOR transactions, particularly given that the financial authority responsible for the publication of LIBOR has stated that it cannot guarantee that the LIBOR reference rate will be published beyond 2021. Read more.
The LIBOR Industry Working Group, which includes GFOA, NAMA, NAST, BDA and the ABA, published On the Hunt for LIBOR: Where to find your exposure and what to do about it, a resource to help state and local issuers identify areas in which they may find potential LIBOR exposure.
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