For over a decade, no one has had to worry much about arbitrage rebate or yield restriction in the world of tax-exempt debt. Interest rates were so low, for so long. Well, that is no longer the case. In the past two years, rates have increased significantly, specifically 11 times by the Fed. This has the potential to generate positive arbitrage for bonds issued since 2022 and any new money/construction financings between 2019 and 2021 that have construction proceeds remaining.

While these debt issues would have likely generated negative arbitrage in the first three years, they may have generated positive arbitrage since.

As it’s been so long since arbitrage has been a concern, this may be new territory for some. To ensure you are in compliance with your tax-exempt debt, be sure you are current on all your arbitrage rebate and yield restriction analyses. If you need assistance, contact us at NBS.