WASHINGTON, April 19 Issuers in the U.S. municipal bond market will soon have an alternative way to calculate the bids in competitive bond sales and those bidding on deals will have greater access to information about issuers, market technology company Ipreo told Reuters on Friday.
In a press release to be published on Monday, Ipreo said the two services would be available to users of its software in the second quarter of this year. Representatives from the company said they would likely be available for use by June.
The new bid calculation, known as TICPlus, was developed by Andrew Kalotay Associates and builds on the conventional True Interest Cost, or TIC, method by adding in bonds' call option values. This will account for the option to refund bonds, according to Andrew Kalotay Associates.
Kalotay approached Ipreo with the idea and the company found there was "interest and curiosity across the board" when it spoke to issuers and sell-side firms, said Allen Williams, executive vice president and managing director of Global Fixed Income Capital Markets at Ipreo.
The method has yet to be tested in the marketplace, and Ipreo will check if its clients find it "makes more economic sense," he said.
Issuers are waiting to try Ipreo's new service before forming an opinion, but Wisconsin has already looked at addressing the call option value in its competitive bids, said David Erdman, the state's assistant capital finance director.
One result of the review is that the notice of sale for its general obligation issuance next week requires coupons on bonds maturing on, or after May 1, 2029, to have a minimum coupon of 4 percent.
In the other service to be unveiled, a bidder reviewing a specific deal on Ipreo would be able to click on a link leading to a report on the issuer's disclosure filings over the past five years.
The report, compiled by the company RegStat Services, is intended to give underwriters a convenient way of checking whether issuers are complying with regulations on disclosure.
The $3.7 trillion U.S. municipal bond market had long suffered from a dearth of information about issuers, and many of those selling debt file annual reports and other documents months and even years late.
The Securities and Exchange Commission and the Municipal Securities Rulemaking Board both have pressed for better disclosures and record-keeping, especially given the recent financial struggles of states and cities, and are developing stricter regulations on disclosure.
"I think there is strong demand for this. We're in a highly regulatory environment and this is something clients have to do today," said Williams, adding Ipreo's customers had expressed enthusiasm for the quick access to the reports.