Calculating Interest Rates:  #2 of 4:  The Muni OBJ

There are few higher profile topics in todays’ news than interest rates: We’re reminded of the tremendous global impact Paul Volcker had from 1979 thru 1987; we learn even more about the Federal Reserve and their influence on our lives since Federal Reserve Chair Powell is following that same playbook working to rein in inflation; and, we see it in our day to day finances how a 3.67% 10 Year Treasury Bill on 10/03/22 vs. 1.48% on 10/01/2021 impacts our mortgages, business growth, equipment finance rates, savings accounts and much more. I’m not here to tell you if this strategy is right or wrong – I will share how it impacts the cost state and local government pays for borrowing: The work we do for you!

Bloomberg reported the 10 Year High Grade Municipal Bond closed on 10/7/22 at 3.17% – meaning the strongest AAA rated bonds issued in large amounts were paying 3.17% vs. 1.17% on 10/8/21: An increase of 271% in One Year! In simple math, if your state were to borrow $1 Million at 1.17% for 10 years, their payment would be $8,834 per month for a monthly payment loan vs. today that same loan would have a payment of $9,735 per month costing $108,120 more over time or more than 2.8 times the amount of interest! These are the benchmarks the tax-exempt finance market uses when financing your fire truck or LED retrofit or performance contract, solar system and electric trash truck. Yes, money
is becoming more expensive and is likely to continue this upward trend for some time to come.

And while this 1 year graph looks like a climb up Mount Evans here in Colorado, there are ways to minimize the impact to your budget: First and foremost, lock in your cost of borrowing today before the next rate increases; use Section 6417 in the Inflation Reduction Act to receive cash rebates for your energy projects; and, structure your repayments to match your cash flows from your revenue sources and projects. You can also earn more at your bank for savings and money market so chipping away is the right plan!

This is a fair bit to digest for one blog – and if you’re like me, you may need an adult beverage to wash it all down ‘cuz it’s real.

These data are solely the opinion of Saulsbury Hill Financial, LLC and do not reflect the opinions, guidance or recommendations of any other entity or person(s).

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