RVMunis

RVMunis on Bloomberg Correctly Handles De Minimis

Bloomberg users now have access to RVMunis, an OAS-based app which enables muni portfolio managers and traders to measure risk with unprecedented accuracy and speed. It combines the unique functionality of Kalotay's patent-pending, tax-neutral MuniOAS software and RiskVal's award winning RVFI fixed income platform.

The so-called de minimis tax effect depresses the prices of discount munis. However, because standard analytics fail to account for it, they underestimate effective duration and overestimate OAS, often by wide margins. MuniOAS captures the correct risk by incorporating the tax effect for bonds trading below par. As shown, the incorrectly estimated duration of a 10-year discount muni is currently about 9, while the correct, ‘tax-neutral’ duration is closer to 13.

Duration – 10-Yr Discount Bonds, 10-Yr Rate 3%

MuniOAS

The app seamlessly integrates Bloomberg bond terms and prices, and stores portfolios for ongoing analysis. Users can access several benchmark yield curves. RVMunis reports tax-neutral risk measures, including OAS, effective duration and KRDs. It also displays the effect of a 100 basis point shift on the portfolio value.

RVMunis (Click to Enlarge)

Bloomberg Users: APPS RVMUNIS <GO>