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CalHFA outlines hedging strategy after bond-market volatility, touts MyACCESS bond debut
Summary
CalHFA financial staff described recent market volatility and a Moody’s-linked downgrade impact, explained a hedging/reservation strategy for the new MyACCESS single-family bond program and reported strong investor demand for the inaugural $50M taxable issuance.
CalHFA Director of Financing Erwin Tam and underwriters at RBC presented a capital markets briefing that framed recent agency decisions in the context of pronounced market volatility and a Moody’s downgrade of U.S. sovereign ratings.
Tam said the downgrade—reflected in recent reductions of some CalHFA bond ratings—was broadly applied across HFAs and resulted from sovereign and treasury-market movements rather than agency-specific credit deterioration. He told the board the agency is managing exposure by using a reservations-plus-hedging approach for the MyACCESS single-family product: CalHFA will take reservations, hedge that week's reservations with treasury hedges and pick a date-certain issuance window rather than issuing opportunistically and holding proceeds. That policy, Tam said, is enabled by the board-adopted financial risk-management policy that permits hedging and a hedge reserve.
Albert Luong of RBC reviewed the March taxable MyACCESS issuance (roughly $50 million), saying the transaction drew roughly two times oversubscription (~$90M orders), participation from 13 accounts, and produced an average investor yield around 5.48–5.50%. Luong said the structure included a PAC (planned amortization class) that helped institutional demand and that a social bond framework/SPO (second-party opinion) was created to designate ESG interest in the deal.
Board members asked whether the agency should size later deals to match observed demand, whether to share derivative upside with borrowers if markets move favorably, and whether CalHFA can provide builder/construction products under the current indenture. Staff said the agency cannot convert this MBS-backed indenture into a construction-lender product without statutory changes and suggested construction takeout is more aligned with multifamily practice; staff also committed to a deeper data report on MyACCESS borrower profiles once reservations convert to securitized loans.
Tam and Luong emphasized that forward rate commitments for multifamily loans require CalHFA to accept interest-rate risk until permanent conversion and that the agency has entered hedges to manage that exposure; they cautioned that tax-exemption value (tax policy) remains an unhedgeable risk.
