When to Bid Bond-Proceeds Investments: Before or After Closing?

An issuer can bid a bond-proceeds investment once two things are settled: the day the money will be there, and the term and drawdown pattern the investment has to match.

For proceeds invested at the bond closing, that places the bid window ahead of the closing, with bids due on a set day; for money that arrives later, the bid moves to that fund's own calendar.

The products involved are, as the SEC has described them, instruments tailored to a municipality's specific collateral and spend-down needs, such as guaranteed investment contracts, repurchase agreements and forward purchase agreements, and the SEC describes competitive bidding run by bidding agents as the most common way to establish their fair market value.

This page covers when that solicitation runs relative to pricing, closing and the market, within the broader guide to competitive bidding.

Bidding before pricing vs after closing

The rules below key the bid to the deposit and drawdown schedule and the issue date rather than to pricing: when proceeds fund at closing, the bid runs before the closing; when money arrives later, the bid runs whenever that money's deposit date and term are settled.

The sequencing starts with a rule about content rather than dates: under the fair-market-value safe harbor, Treasury Regulation §1.148-5(d)(6)(iii)(A)(5) requires a guaranteed investment contract's solicitation terms to take into account the issuer's reasonably expected deposit and drawdown schedule, so the draw schedule has to be settled before specifications can go out.

The tax calendar pulls the same direction: whether an issue consists of arbitrage bonds is judged on the issuer's reasonable expectations as of the issue date, and an officer of the issuer responsible for issuing the bonds must certify those expectations in good faith, stating the facts and estimates that form the basis for them (Treasury Regulation §1.148-2(b)).

No certificate is required where no unspent gross proceeds are expected after the issue date beyond a bona fide debt service fund, or where the issue price does not exceed $1 million; the certification is evidence, not a conclusion of law.

Timing also decides whose bids count toward the safe harbor's three-bid requirement: the lead underwriter in a negotiated underwriting transaction is deemed to have a material financial interest in the issue until 15 days after the issue date, so a bid from it does not count among the three bids from solicited providers without a material financial interest that the safe harbor requires, at least one of them from a reasonably competitive provider (Treasury Regulation §1.148-5(d)(6)(iii)(B)).

An underwriter, in the MSRB glossary's definition, is a municipal securities dealer that purchases a new issue of municipal securities from the issuer for resale in a primary offering, through negotiation or competitive bid; the investment solicitation runs on its own specifications however the bonds themselves are sold.

Proceeds that arrive after closing invert the same logic: earnings swept from a maturing investment, or an unspent construction balance, are bid when their own deposit dates and terms settle, not on the bond's calendar.

When competing bids become visible

Inside the window, the timing that matters most is when bid information moves.

Treasury Regulation §1.148-5(d)(6)(iii)(A)(6), a second condition of the same safe harbor, requires every potential provider to have an equal opportunity to bid: if any provider may review other bids before bidding, all must be able to, which bars an exclusive last look.

The SEC's Wachovia case shows the abuse those words answer: "last looks," where a provider received competing-bid information from the bidding agent, and "set-ups," where the agent deliberately obtained non-winning bids from other providers, with the SEC charging that at least 58 reinvestment transactions in 25 states and Puerto Rico were rigged between 1997 and 2005, and Wachovia paying $46 million to the SEC and $102 million under agreements with other federal and state authorities.

The series opened earlier: on December 7, 2010, the SEC found that Banc of America Securities won bids on 88 affected reinvestment instruments through last looks and set-ups while bidding agents received undisclosed payments, and BAS agreed to pay more than $36 million to the SEC and $101 million to other federal and state authorities.

By December 2011, the SEC said, more than $743 million had been recovered from financial institutions in these settlements and 18 individuals had been indicted or had pled guilty, and the misconduct had deprived municipalities of a conclusive presumption that reinvestment instruments were purchased at fair market value.

How bids are weighed once they arrive is the subject of the evaluating bids page.

Forward-settling agreements and rate locks

A forward-settling agreement fixes an investment's terms now for deposits that arrive on later dates, and a rate lock is the same idea applied to the rate alone.

The arbitrage rules treat that structure as a guaranteed investment contract: 26 CFR 1.148-1(b) includes any agreement to supply investments on two or more future dates, such as a forward supply contract, alongside nonpurpose investments with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate.

The MSRB glossary describes the form a forward can take: delivery of specific types of securities on specified future dates at fixed yields, which it offers as a way to optimize the investment of a debt service reserve fund.

Product mechanics and the cases where a forward fits are covered on the forward delivery agreement page.

For funds that are to hold a Treasury security rather than a counterparty contract, the SLGS program supplies the lock on the rate side: Treasury releases the SLGS rate table by 10 a.m. each business day, Eastern time, and the table that applies to a subscription is the one in effect on the business day the subscription process starts (31 CFR 344.4(b)(1)-(2)).

If the table has not appeared by 11 a.m., Eastern time, the prior business day's table governs, and the issuer may designate any rate up to the table maximum.

The lock holds within limits: a Time Deposit subscription can be changed until 3 p.m. Eastern on the issue date, but no security's principal by more than 10%, no maturity by more than 30 days for certificates, 6 months for notes or 1 year for bonds, and no rate above the table in effect when the subscription started (31 CFR 344.5(d)-(f)).

Cancellation is not automatic: 31 CFR 344.5(c) permits it only where the subscriber establishes to Treasury's satisfaction that it is required for reasons unrelated to using the SLGS program to create a cost-free option.

The securities themselves, and how subscriptions run, are covered on the SLGS page.

For an investment bid the ordinary way, the award itself is the lock on rate and terms.

Coordinating with the closing

Coordinating with the closing means running every deadline backward from the closing date so each one lands before the money moves.

The closing is when the underwriter's purchase settles and the issuer receives the proceeds to invest, so the award, its documents and certifications have to be finished first.

A refunding escrow adds a verification link to that chain: GFOA describes an escrow agent, typically a commercial bank, that holds the escrow investments, and a verification agent, typically a CPA firm, that confirms the escrow is sufficient and, where a yield limit applies, that escrow yield does not exceed the permitted yield.

The bids come from an escrow bidding agent that solicits bids for open-market escrow securities, a role GFOA notes a municipal advisor may be able to fill, described on the Bidding Agent page.

That orders the last stretch of the calendar: bids, then verification, then closing, as detailed on the escrow verification page.

Where SLGS securities fill a fund or an escrow, Treasury's lead times set the outer calendar: the issue date must be a business day no more than 60 days after Treasury receives the subscription, and Treasury must have the subscription at least 5 days before issue for $10 million or less, and at least 7 days before issue for more than $10 million (31 CFR 344.5(a), with 31 CFR 344.8(a) applying the same lead times to Demand Deposits).

Those are calendar days (31 CFR 344.1).

The regulation's own example does the arithmetic: a May 16 issue date needs the subscription by May 11 for $10 million or less, by May 9 for more, and no subscription for that issue date is accepted before March 17, the 60-day boundary.

A closing that moves does not carry the subscription with it: a Time Deposit's issue date cannot change except up to 7 days later, and only for unforeseen circumstances beyond the issuer's control (31 CFR 344.5(d)-(f)).

Settlement keeps its own clock: full payment is due by Fedwire by 4 p.m. on the issue date, Eastern time; a subscriber that fails to settle is ineligible to subscribe for six months, and a late settlement Treasury accepts waives the penalty but charges the accrued interest plus a $100 fee per subscription (31 CFR 344.2(g)-(h)).

After closing, the calendar keeps running: Form 8038-G is due by the 15th day of the 2nd calendar month after the close of the calendar quarter in which the bond is issued, filed separately for each governmental issue with an issue price of $100,000 or more, with smaller issues reporting on Form 8038-GC.

Line 36 asks for the gross proceeds invested in a guaranteed investment contract, the GIC final maturity and the provider name, so the bid result feeds a tax filing on a fixed clock, and the instructions note late-filing relief under Rev. Proc. 2002-48.

Where that filing sits in the wider compliance calendar is covered on the post-issuance compliance page.

Market timing considerations

Market conditions change what the bids say, not when the bid has to run: the dates that fix the calendar are the day the money arrives and the day the spending schedule needs it.

GFOA's guidance on managing proceeds puts the same weight on the calendar, recommending that the investment's duration be no longer than the expected drawdown schedule, that the schedule be revisited periodically, and that governments stage issues over the construction period and avoid issuing well before spending begins, to limit arbitrage liability and negative arbitrage.

Market data moves day by day: Treasury's official yield curve is a par yield curve built with a monotone convex method from indicative bid-side quotes on the most recently auctioned securities, collected by the Federal Reserve Bank of New York at or near 3:30 p.m. each trading day.

Treasury's methodology description was revised on February 18, 2025, and the quotes refresh each trading day, so a window that stays open collects a different market than one that closes.

Today's Treasury yields, SOFR and SLGS levels sit on the current rates page, and the daily rate-update emails carry Treasury yields, SOFR and SLGS links each business day.

How reinvestment strategy bends when rates rise or fall is the subject of the rate environment page.

Waiting also has a price: proceeds held short while the issuer waits can earn less than the interest the bonds pay, the spread covered on the negative arbitrage page.

An independent read on both halves, the calendar and the market, is what a reinvestment advisory review covers, from fund objectives, permitted investments and draw schedules to credit terms, market conditions and timing, and it can hand the solicitation to an independent Bidding Agent: use mGIC as Bidding Agent or ask for a free, no-obligation reinvestment review.

Final determinations about an issue's investment terms and their tax treatment belong to bond counsel and tax counsel.

Last updated 2026-10-06.

This page is general educational information about municipal finance and federal and state rules as of the date shown. It is not legal, tax or investment advice, and it is not a recommendation about any particular investment. Product availability, legality and suitability depend on the issuer, jurisdiction, governing documents and transaction-specific facts. Final legal and tax determinations remain with the issuer's bond counsel, tax counsel and other advisors.