Northeast first half volume rises amid coronavirus curveball
The municipal bond issuers of the Northeast sold $55.4 billion of debt during the first half of 2020, according to Refinitiv data, marking a 21.1% increase from the same period in 2019 despite financial headwinds caused by the COVID-19 pandemic.
Wesly Pate, senior portfolio manager at Income Research + Management, said that that many of the bond deals in early 2020 were already well in the works before the pandemic struck the U.S. in March.
Taxable bond volume more than tripled in the region compared to the year before, to $13.3 billion, a big catalyst for the year-over-year increase.
“We saw near a complete cease of issuance there for a little while in March in the muni market, but the projects that debt was being issued for had already been approved and are still in the pipeline,” Pate said.
The market is "trending well ahead of expectations for taxable issuance,” he said.
Borrowing volume increased in most Northeast states and the District of Columbia. New Jersey and Maine were the only states that experienced first-half issuance declines.
The region also includes Puerto Rico and the Virgin Islands, where no bonds were sold in the first six months.
Issuers out of New York led the way for the Northeast, selling $20.8 billion, a 23.8% year-over-year increase.
The Metropolitan Transportation Authority was the largest issuer in the northeast and second biggest nationally at the midway point of the year with $4.4 billion in bonds sold led by a $1.73 billion deal in May, the region's second-largest deal of the half, topped only by a $1.78 billion New York State Urban Development deal in June.
New York City was the Empire State’s second leading issuer at $2.8 billion followed by the Dormitory Authority of the State of New York with $2.5 billion.
Massachusetts was the region’s second biggest source of bond volume with $9.6 billion of borrowing through 132 issues, a 56.4% spike from the first half of 2019.
The Commonwealth of Massachusetts led the way with $2.2 billion in debt sold to finish seventh in the nation among municipal issuers. The Massachusetts School Building Authority issued $1.4 billion of debt to finish second in the Bay State with the Massachusetts Development Finance Agency placing third at $1.1 billion.
Pennsylvania finished the first half with $9.4 billion in bond volume on 288 transactions for an 8.6% year-over-year increase.
Penn State borrowed $1.5 billion paced by a $1.1 billion private placement deal on May 5. The Geisinger Authority was the Keystone State’s second biggest issuer with $748.2 million that all came on one transaction held June 18. The Pennsylvania Turnpike Commission sold $687.1 million in debt, down from $947.2 million it borrowed during the first six months of 2019.
Janney Capital Markets managing director Erin Ortiz said the Penn State private placement deal “somewhat inflated” the issuance jump, since minus that transaction volume would have been down. The deal was sparked by short term debt that Penn State issued and then subsequently refunded with a long-term issuance.
“In aggregate, schools are typically a significant portion of Pennsylvania issuance volume given the funding needs across the states 500 districts and other K-12 schools,” Ortiz said. “What’s unusual for the sector this year is the sizeable taxable issuance, with schools likewise benefiting from the lower rates by being able to advance refunding higher coupon debt for savings, which is clearly more important now that ever given the pressure on district revenues."
Connecticut issuance grew 17.8% in the first half compared to the year-ago period, reaching $3.2 billion.
The State of Connecticut sold $1.7 billion led by an $850 million offering on May 20 and $500 million deal on May 28. Connecticut Health and Educational Facilities issued $386.3 million including a $194.285 revenue bond deal for Yale University on June 10.
New Hampshire’s volume more than quadrupled from the same period in 2019, topping $1 billion. Most of the increase came from the $653.4 million issued by the New Hampshire National Finance Authority, a conduit issuer authorized in 2018 to sell bonds from around the country. The New Hampshire Health & Educational Facilities Authority was the Granite State’s second biggest issuer with $125 million of borrowing.
New Jersey’s first-half bond volume dipped 15.1% to $3.3 billion. The New Jersey Economic Development Authority was the state’s top issuer with $678.6 million followed by the New Jersey Educational Facilities Authority with $468.7 million.
The state government sold $325 million of general obligation bonds in January in its first GO deal since 2016, but Pate said he was “surprised” there wasn’t more debt issued by New Jersey in the first half given the state’s large capital needs and cash flow struggles caused by the pandemic delaying the state tax-filing deadline by three months to June 15.
The state is planning an active second half of borrowing after Gov. Phil Murphy signed a bonding bill permitting up to $9 billion of borrowing over the next year to patch revenue holes caused by the virus.
Bank of America continued its longtime reign as the Northeast’s top bond senior manager credited with a par volume of $8.9 billion during the first six months. Citi finished the midday point of 2020 in second place up for the third straight year while Barclays took the third place spot after placing seventh a year ago. RBC Capital Markets came in fourth place for the third straight year and Morgan Stanley rounded out the top five.
Mintz Levin Cohen, credited with $4.9 billion in business, took over the Northeast’s top bond counsel spot after placing fifth last year. Nixon Peabody was the region’s runner-up bond counsel for the second straight year with Bryant Rabbino rising to the third spot after placing ninth at the midway point of 2019. Hawkins Delafield and Ballard Spahr finished in fourth and fifth places, respectively.
Public Resources Advisory Group moved to first place from second as the top financial advisor in the Northeast, credited with $11.3 billion of business, narrowly ahead of PFM Financial, which was followed by Acacia Financial Group, Hilltop Securities and Frasca & Associates.
The region’s issuers sold 1,021 transactions from January through June 30, according to Refinitiv data.
Bond issuance nationally was up 18.2% from the first half of 2019 at $205 billion. The Southwest experienced the biggest year-over-year first half jump at 41.8% with the Midwest and Far West seeing increases of 24.1% and 8.8%, respectively. Only the Southeast saw a first half decrease of 7%.