The variable-rate debt in the portfolio of New York's Metropolitan Transportation Authority is well under control, according to its finance director.
Patrick McCoy, in his
The state-run authority operates New York City's subways and buses, the Long Island and Metro-North railroads and several intraborough bridges and tunnels,
Fixed-rate debt accounts for $31.7 billion, or 85% of the MTA's portfolio. Hedged/synthetic ($2.3 billion), unhedged ($2.27 billion) and term rate ($980 million) account for the balance.
Variable-rate debt includes $2.7 billion of variable rate demand bonds and $1.8 billion of floating rate notes, where the interest rate is based on a set spread to a floating index.
The total excludes $34.5 million of state service contract bonds, $277.7 million of special obligation bonds and $1.06 billion of Hudson Rail Yard Trust obligations. Fixed rate includes $1.5 billion of bond anticipation notes. Term-rate bonds have a fixed rate for a defined period — until the mandatory tender date — but do not have a fixed rate for the entire life of the bonds.
According to McCoy, long-term tax-exempt bond yields remain low ending 2017 at 2.54%. The five-year average, he said, is 3.08%. Short-term rates have increased significantly since early 2016, he added ending 2017 at 1.71%. The five-year average is 0.29%.
"That's the environment that we're in right now and that's why we continue to keep variable rate a notable part of our portfolio but not an excessive part of our portfolio," said McCoy.
The full MTA board is scheduled to meet Wednesday in lower Manhattan.