An interest rate swap in which one party pays a fixed interest rate and receives floating-rate interest payments based on the Bond Market Association’s (BMA’s) floating rate municipal swap index. In other words, the payments of the variable leg are based upon fixings of the US SIFMA Municipal Swap Index (formerly the BMA Municipal Swap Index or “BMA Index”). This index is published weekly, reflecting the average rate of issues of tax-exempt variable-rate debt, and provides a benchmark floating rate in municipal swap transactions. The BMA index is usually 65%-70% of its taxable equivalent 1-month LIBOR. This percentage is subject to the risk that marginal tax rates will change or that there will be revisions to the US Tax Code.

The municipal interest rate swap can be used to either bet on the direction of interest rates in the municipal market or hedge exposure to U.S. state and local government debt.

This swap is also referred to as a BMA swap.