The Handbook of Municipal Bonds

CHAPTER 17

Interest Rate Swaps and Their Application to Tax-Exempt Financing

Eric H. Chu Managing Director Bond Logistix LLC

 

Craig Underwood President Bond Logistix LLC

 

Thomas B. Fox Managing Director Bond Logistix LLC

 

Jon A. McMahon Financial Consultant Bond Logistix LLC

 

Roger L. Davis Chair, Public Finance Department Orrick, Herrington & Sutcliffe LLP

 

Stephen A. Spitz Partner, Public Finance Department Orrick, Herrington & Sutcliffe LLP

 

Albert Simons III Partner, Public Finance Department Orrick, Herrington & Sutcliffe LLP

 

George G. Wolf Chair, Tax Department. Orrick, Herrington & Sutcliffe LLP

This chapter is reprinted in its entirety courtesy of its authors and publishers Bond Logistix LLC, a registered investment advisor and derivative advisor (www.bondlogistix.com) and Orrick, Herrington & Sutcliffe LLP a global law firm with a finance emphasis (www.orrick.com).

The global interest rate swap market is remarkably vast, both in terms of size and scope of products, and it continues to grow rapidly. Within the U.S. public finance sector, the use of interest rate swaps and their close relatives is becoming more common as increasing numbers of governmental entities utilize them to reduce their borrowing costs, better manage or limit their interest rate risk, and effect better matching of assets and liabilities. Written for the benefit of issuers of tax-exempt debt (referred to in this chapter as agencies) and other entities that have access to the municipal capital markets, ...