Investors are currently considering a new-issue calendar totaling $12 billion, with nearly $2 billion of that debt coming from New York City. The deal, which amounts to $1.8 billion, is the largest offering on the calendar for the week and comes on the heels of the city’s $1.2 billion refunding issuance in July. The offering consists of two series – a negotiated $1.5 billion of tax-exempt general obligation bonds with maturity dates ranging from 2026 to 2052, and $300 million of taxable general obligation bonds with maturity dates from 2032 to 2037, which will be sold competitively.
Loop Capital Markets is acting as the bookrunning senior manager for the first series of bonds, with institutional pricing set for Wednesday following a retail order period on Tuesday. In addition to Loop Capital Markets, there are 25 other firms serving as co-managers on the deal team. Public Resources Advisory Group and Frasca and Associates are co-municipal advisors, while Norton Rose Fulbright and Bryant Rabino are serving as co-counsel for the deal.
Market Outlook and Demand
According to Patrick Luby, head of municipal strategy at CreditSights, New York City stands to benefit from the loaded refunding calendar, with demand for the new tax-exempt bonds likely to be supported by the $7.6 billion of redeemed bond principal returning to investors from New York issuers this month. However, Luby cautions that the pace of redemptions is expected to slow down significantly in September to $1.1 billion. The year-to-date supply of bonds from New York issuers was up 69% through the end of July, with the recent surge in double-exempt New York bonds potentially impacting reinvestment demand in the coming month. As a result, Luby anticipates that the spreads for the tax-exempt series will likely widen.
In the city’s last deal, a 10-year maturity with a 5% coupon yielded 3.16%, with spreads over MMD’s AA and AAA yield curves standing at 24 and 34 basis points, respectively. The recent block trading of New York City GOs showed various maturities trading at competitive rates. Given the limited supply of taxable municipal bonds this year, Luby believes that the taxable bonds should attract significant demand. New York City’s GOs hold strong ratings from Moody’s, S&P Global Ratings, Fitch Ratings, and Kroll Bond Rating Agency, reflecting the city’s solid financial position and budgetary controls.
New York City is gearing up for more debt issuances in September, with a $1.8 billion deal from the NYC Transitional Finance Authority set to price in the week of September 9, followed by a $1.3 billion Empire State Development Corporation deal the week of September 16. The New York State Environmental Facilities Corp. is also set to price $218.84 million of green state revolving funds revenue bonds on Tuesday.
The upcoming $12 billion new-issue calendar presents both opportunities and challenges for investors, with New York City’s $1.8 billion deal taking the spotlight. As market dynamics and demand continue to evolve, the city’s strong ratings and prudent fiscal management are expected to attract investor interest despite the potential widening of spreads in the near term.