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Abstract: 

The elimination of advance refunding following the signing of the Tax Cuts and Jobs Act in December 2017 will have significant effects on the municipal market. In recent years, most municipal bonds aimed at institutional investors carried an above-market 5% coupon and had a 10-year call. The 5% NC-10 structure had wide appeal for a variety of reasons, a primary one being the bonds’ eligibility for advance refunding. In the absence of advance refunding, the 5% NC-10 structure will lose much of its appeal. This article discusses the rationale for prior standard practices, and the structural changes anticipated in the municipal market going forward.

Keywords: Municipal capital market, advance refunding, Tax Cuts and Jobs Act, 5% NC-10 structure, institutional investors

Affiliations:  1: Andrew Kalotay Associates, Inc..