Stanford University, with the fourth-richest endowment among U.S. schools, plans to tap the municipal market with $410 million of top-rated, tax-exempt debt as soon as this week as benchmark yields set 10-month lows.
The California Educational Facilities Authority will issue the securities, with some proceeds going toward capital projects, according to offering documents released today. The university, based near Palo Alto, California, will also borrow about $150 million in a taxable offering.
Stanford, which carries top grades from the three biggest rating companies, joins schools from the University of California to Princeton University in New Jersey in borrowing in 2014. The institutions are taking advantage of a rally in the $3.7 trillion municipal market that has driven yields to the lowest since June.
About a year ago, Stanford borrowed through the municipal market, pricing bonds maturing in three decades to yield 3.2 percent, data compiled by Bloomberg show. At that time, the interest rate on benchmark 30-year debt was 2.94 percent. It’s now about 3.59 percent.
The choice of tax-free debt contrasts with the Massachusetts Institute of Technology, which sold $550 million of taxable bonds maturing in 100 years this month. Yale University also opted for taxable notes this month.
Stanford’s endowment was about $18.7 billion as of August, according to the National Association of College and University Business Officers and Commonfund Institute. Only Harvard University, Yale and the University of Texas System had higher endowments among U.S. schools.
The California school received about 8,000 more applications than Cambridge, Massachusetts-based Harvard for the coming academic year. It accepted 5.1 percent of applicants, compared with 5.9 percent for the East Coast college.
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