With a $12 billion new-issue calendar at hand, investors are closely evaluating their options, particularly as $2 billion of the available debt stems from the city of New York. This $1.8 billion deal, which is the largest offering of the week, follows the city’s $1.2 billion refunding issuance in July. The first series consists of $1.5 billion in tax-exempt General Obligation (GO) bonds with varying maturity dates, while the second series involves $300 million in taxable GOs to be sold via competitive bidding. The retail order period for the first series is anticipated on Tuesday, with institutional pricing to follow on Wednesday.
According to Patrick Luby, head of municipal strategy at CreditSights, New York City stands to benefit from the robust refunding calendar. The market conditions suggest that demand for the new tax-exempt bonds will be fueled by the $7.6 billion of redeemed bond principal set to be returned to investors from various New York issuers this month. However, as redemptions are expected to decrease substantially in September to $1.1 billion, the pace of reinvestments might slow down. Despite the positive factors, there is a possibility of wider spreads for the tax-exempt series due to the increased supply of double-exempt New York bonds and potential reduced reinvestment demand in the upcoming month.
New York City’s GOs hold strong credit ratings, with Moody’s Ratings rating them Aa2, S&P Global Ratings rating them AA, Fitch Ratings rating them AA, and Kroll Bond Rating Agency rating them AA-plus. Fitch’s recent rating report emphasizes the city’s robust budget management, revenue control, and expenditure control, which help counterbalance the city’s high long-term liability burden. Despite the city’s strong fiscal discipline, Fitch predicts that the long-term liabilities will remain elevated compared to personal income levels.
Looking ahead, there are more debt issuances scheduled in September within the state of New York. The NYC Transitional Finance Authority is preparing for a $1.8 billion deal in the week of September 9, while the Empire State Development Corporation is gearing up for a $1.3 billion issuance the following week. Additionally, the New York State Environmental Facilities Corp. is set to price $218.84 million of green state revolving funds revenue bonds on Tuesday, adding to the vibrant municipal bond market landscape.
The $12 billion new-issue calendar, highlighted by New York City’s substantial $1.8 billion debt offering, presents both opportunities and challenges for investors in the municipal bond market. With strong credit ratings, market demand, and upcoming issuances, the market dynamics are evolving, requiring investors to stay informed and vigilant to make sound investment decisions.