Several muni borrowers looking to refinance outstanding bonds are delaying deals due to yields near record highs. For instance, New Jersey’s Transportation Trust Fund Authority was planning to sell $1.7 billion of refunding bonds on Oct. 1, according to a posting on the state’s Department of Treasury website, but the deal did not price. Issuers attempting to sell new debt to grab lower interest rates and reduce debt-service costs are now facing a tricky situation after last week’s selloff. Yields on benchmark 30-year muni debt soared to about 5.26%, the highest since at least 2011, before falling back to roughly 5.12% as of Monday.
About $6 billion of refunding deals are on hold or delayed as issuers wait for lower yields, said Ajay Thomas, head of public finance for FHN Financial. “By the nature of where rates have gone in the past 10 days to two weeks, you are probably going to see a lot of refunding deals that made economic sense fall out of the money,” Thomas said. A $450 million refunding deal for Philadelphia’s school district that was on the schedule to price this week is now listed as day-to-day, according to Samantha Funk, head of public finance at PNC Bank.
Elevated yields could lead to more delayed deals. The Metropolitan Transportation Authority, which runs New York City’s transit network, is looking to refund $1 billion of prior debt this month, though the deal is subject to market conditions, according to MTA documents.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing