Municipal Derivatives and Reinvestment Products
Hedge your interest rate risks
In every debt financing, you need to manage risks and exposures. When should you choose a variable rate? When should you fix your interest rate?
We can help. We analyze the current interest rate environment and determine when it makes sense to put a hedge in place for your financing. We can also execute transactions that reduce your interest rate exposure, or potentially save you valuable basis points on financing costs.
Analysis and evaluation of derivative product risks
Because interest rate swaps and hedging products can be complex and new to many of our clients, we conduct a thorough risk analysis for each potential transaction. In general, these risks typically include interest rate risk, basis risk, tax risk, counterparty risk and termination risk. We will help make sure you fully understand the potential risks as well as the benefits of any transaction before deciding to proceed.
Piper Jaffray Financial Products I, II and III were formed specifically to enter into interest rate swaps and hedging transactions with our clients. Our platform provides a highly rated credit support for our payment obligations to our clients to assure our performance.
We serve as a principal on a wide variety of transactions including:
- LIBOR-based interest rate swaps: an exchange of payments that allows you to change your interest rate exposure from a variable to a fixed rate of interest (or vice versa) by entering into a swap where the variable interest payment is based on LIBOR.
- SIFMA based interest rate swaps: an exchange of payments that allows you to change your interest rate exposure from a variable to a fixed rate of interest (or vice versa) by entering into a swap where the variable interest payment is based on the SIFMA index (an index based on short term tax-exempt variable rate bonds).
- Rate locks: a hedging agreement that is terminated at a specific date in the future, with a cash settlement payment that reflects changes in municipal interest rates. This settlement payment is designed to offset changes in the cost of borrowing for the hedged bond transaction.
- Forward bond purchase agreements: an agreement for Piper Jaffray to purchase your bonds at a set interest rate at a date in the future.
- Basis swaps: an exchange of payments based on two different interest rate indices (such as LIBOR and SIFMA), which allows you to manage your risk exposure by shifting your interest rate exposure from one index to the other.
We offer assistance with various reinvestment alternatives for your bond proceeds, including:
- Guaranteed investment contracts (GICs)
- Repurchase agreements
- Forward delivery agreements (forward purchase agreements)
- Portfolios of securities
We assist in investing construction funds, capitalized interest funds, debt service reserve funds and escrow accounts.
Let us help determine which product makes the most sense for you. We will conduct a bid process to assure that you get the best interest rate for your investment.