New York 50A and 50B Case Resolution
Another New York 50A and 50B Discount Rate Update
So much for the sustained upward movement of 10-Year yields! Since the beginning of the year, daily yields have moved from 2.46% to over 3.99% or about 150 basis points. Last month, the movement reversed and went from 3.99% 3.37% or a more than 50 basis point fall.
Think of it this way, the buyers of the June auction achieved a theoretical gain in value of 5.4% in less than one month. Mighty attractive if you are on the right side of the transaction and this is your business.
But neither the plaintiffs nor their attorneys, nor the defendants nor their insurers are in the business of trading Treasuries. And they shouldn't be!
Over the last two years we have been pitching the view that the parties should employ some average of 10-Year Treasury rates/yields to provide stability and predictability rather than employing the yield on the date of the verdict. As you might expect, the average auction rates and yields have not varied more than 30 basis points in the last eight months, except for the heavily weighted two an one year yields. In those cases, the high yield was at the beginning of the period and the low at the end.
We have also suggested that both parties should seek early resolution of cases through settlement, instead of going to verdict followed by extended appeals and enormous amounts of interest. At a minimum, both sides should know the amounts that are at risk before proceeding to trial and, if possible, they should know the position of the other party.
They should also understand the impact of interest on any Award particularly in Wrongful Death actions, and the application and impact of discounting in determining the pre-verdict values on which interest may be applied.
As we have pointed out on other occasions, the current yields are below the breakeven discount rate for elements with a future period of 20-years or less and to which the 4% statutory factor is applied. That means that the discounted Award after the application of the statutory factor is greater than the undiscounted Award. Elements with a future period of 30Years or more are only slightly above the breakeven discount rate.
Take it one step further! If an Award is to be discounted before the application of interest, that discounting will presumably occur at the current rate. That means, the value of any discounted future Award may be greater than the undiscounted Award, and then further discounted at a very low rate before interest of 9% is applied.
Not knowing the likely outcome at the earliest possible date invites a bad resolution. If you don't have access to a facility for performing the various functions associated with an Award that can be resolved through our services or, if data security is an issue that can be resolved through licensing of our technology either on a cases by case basis or on a dedicated basis.
New York 50A New York 50B