21 hrs ago
Municipal Bond Deals Stall as Yields Reach Highest Levels
Cities and government agencies sell bonds to borrow money for projects.
Recently, interest rates on these bonds rose sharply.
When rates rise, borrowing becomes more expensive and refinancing old debt may save less money.
Because of this, several large bond sales were delayed or paused.
These included deals for a Los Angeles convention center, a Nashville convention center, and New Jersey transportation.
The yield on a common 30-year municipal bond reached 5.18%.
Officials and market experts said issuers are waiting for calmer conditions before selling.
More bond sales could be reduced or delayed if the market remains volatile.
A $1.8 billion Los Angeles Convention Center bond sale was delayed and placed on day-to-day status.
A roughly $777 million Nashville convention-center deal was also moved to day-to-day status after its planned Sept. 24 pricing.
A roughly $1.7 billion New Jersey Transportation Trust Fund Authority sale was put on hold because of market conditions.
The 30-year municipal-bond yield reached 5.18%, its highest level since at least January 2011.
About $2.3 billion in municipal deals had shifted to day-to-day status, with roughly $1.5 billion intended to refinance older debt.
- Who
- State and local government borrowers, including the Los Angeles Convention Center, the Metropolitan Government of Nashville and Davidson County Convention Center Authority, and the New Jersey Transportation Trust Fund Authority.
- What
- Several municipal bond sales totaling billions of dollars were delayed, paused, or placed on day-to-day status.
- Where
- The affected projects and agencies are in Los Angeles, Nashville and Davidson County, New Jersey, and North Texas.
- When
- The developments were reported on Monday; one Nashville deal had been scheduled to price on Sept. 24, and another delayed sale was planned for the week of Sept. 7.
- Why
- Municipal-bond yields rose sharply amid expectations of another Federal Reserve interest-rate hike, inflation concerns linked to oil prices, and broader market volatility.
Key facts
- 30-year municipal yield
- 5.18% as of 2 p.m. New York time on Monday
- Yield increase
- Up roughly 60 basis points during the month
- Los Angeles Convention Center deal
- $1.8 billion; delayed and placed on day-to-day status
- Nashville convention-center deal
- Approximately $777 million; moved to day-to-day status after planned Sept. 24 pricing
- New Jersey Transportation Trust Fund Authority deal
- Approximately $1.7 billion; put on hold
- Deals on day-to-day status
- About $2.3 billion in municipal deals, according to an estimate cited in the report
- Potential weekly supply reduction
- JPMorgan strategists estimated a $1 billion to $3 billion reduction if market conditions persist
Quotes
Samantha Costanzo
Head of public finance at Huntington Capital Markets
“Many issuers are being more strategic and thoughtful about how and when they access the market. Today, it’s no longer taboo to hit pause and wait for a more stable tone to avoid messy market days.”
livemint.com
“Market conditions continue to become more challenging”
livemint.com
JPMorgan Chase strategists led by Peter DeGroot
JPMorgan Chase strategists commenting in a Monday report
“The rout in the bond markets took a bite out of supply last week, with deals pulled or downsized”
livemint.com
Sources
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