New York 50A and 50B Case Resolution
New York 50A and 50B Case Resolution
This is another in the continuing saga of 10-Year Treasuries. The daily yields have been used as the A ...rate in effect on the date of the verdict@ or the base discount rate for amended 50A, original 50A and 50B cases.
The daily yields on 10-Year Treasuries were generally rising from the beginning of the year up to the announcement of the regular February auction, and were pretty much in the range between 2.45 and 2.95%.
The latest regular auction has a stated rate of 2.75%, and a yield of 2.818%. The auction rate declined 1 percentage point and the yield declined .962 percentage points from the regular November auction. This discontinuity is likely to remain in the auction market for some time. The auction yield premium of .7% matched the average for all regular auctions since the enactment of Amended 50A, does not seem to indicate predisposition toward rising rates or yields.
The 2.45 to 2.95% yield range is below the breakeven discount rate of 3.625%, or that rate at which the Award after application of statutory inflation and discount rate is larger than the undiscounted Award after application of lump sums. With the exception of Amended 50A, an average Award would be approximately 10% above the undiscounted Award @2.45% and 4 to 5% @ 2.95%.
Current average auction rates and yields offer an opportunity for settlement with liability carriers at some valuation that is less than valuation at the current daily rate, avoids the possibility that resolution will occur at lower rates at some point in the future, and almost certainly avoids the decline in average auction rates and yields over the short to medium term. In this way, the liability carrier will be faced with the risk that delay in settlement may produce an index rate that is lower, and a settlement that is larger.
The following are the average auction rates and yields including the February 17 auction. The results were both unweighted and weighted at a premium of 50% per year. There are three periods covered (all regular auctions since passage of Amended 50A, two years and one year).
|
February 17 |
_______ |
Wgted |
_______ |
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|
Rate |
Yield |
Update |
Rate |
Yield |
Update |
||
|
All |
4.25% |
4.32% |
4.16% |
4.23% |
|||
|
2 Year |
3.92% |
4.01% |
3.72% |
3.80% |
|||
|
1 Year |
3.60% |
3.65% |
3.47% |
3.52% |
The aggressive approach should leave little room for unresolved issues and delays. It should be