The District of Columbia plans to sell $1.13 billion of general obligation bonds in February.
The deals will fund new projects and refinance outstanding debt and come in two parts: $929.6 million of fixed-rate bonds bookrunner Barclays will price on Feb. 10 and $200.7 million of variable rate bonds Barclays will price Feb. 26. Siebert Williams Shank is co-senior on the fixed-rate piece.
"While I am not making an investment recommendation, I expect this deal to be oversubscribed, with some pricing adjustments throughout the process," said Jeff Lipton, market intelligence analyst for The Bond Buyer.
"Buyers will focus more on the general obligation security pledge and less on the use of bond proceeds," he said.
The proceeds of the new money $387.5 million fixed-rate Series 2026A will fund capital project expenditures, refund a portion of outstanding commercial paper bond anticipatory notes and pay the cost of delivering the bonds.
Proceeds from the $542 million Series 2026B will refinance outstanding debt in a combination of current refunding bonds that have reached their call date and bonds for which the district has made a tender offer.
"The district will be using a portion of bond proceeds to purchase certain tendered bonds as a way to achieve interest cost savings given that refinancing options are limited," said Lipton.
"All issuers are looking to reduce their overall interest rate costs with the Federal Reserve moving closer to a more neutral monetary policy," said Michael Pietronico, founding partner at Miller Tabak Asset Management.
"Large deals such as this one should garner reasonable interest as long as it is priced attractively for national municipal bond buyers," Pietronico said.
Moody's Ratings rates D.C. GOs Aa1 with a negative outlook
The Series 2026C is structured as a multimodal (VRO mode) term bond due in 2051, according to the investor presentation for the deal. Moody's assigned its P-1 short-term rating to that component of the deal.
The proceeds will pay for capital project expenditures, refund a portion of the district's refunded capital paper notes, and pay the costs of the bonds. About 15% of the district's GOs are variable-rate, according to Moody's.
Acacia Financial Group and Public Resource Advisory Group are co-financial advisors for all three series.
The deal comes at a time when the city is reeling from the loss of nearly 25,000 federal jobs as Trump administration moves to downsize the federal workforce.
"The optics of this relationship appear more intensified given the uncertain policy shifts stemming from the Trump administration and the fact that the District is not governed independently from the federal government," said Lipton.
"With Congress having exclusive jurisdiction, the ability to veto D.C. legislation, and financial oversight, certain actions through continuing resolutions can open up budgetary challenges for the district," he said.
"The negative outlook on the long-term ratings reflects the increased likelihood of further federal spending and workforce cuts and the District's declining commercial real estate market, leading to lower income, sales and property tax collections," Moody's said when it affirmed the rating.
"The high degree of uncertainty regarding federal government policy changes, notably potential reductions in the federal share of Medicaid funding, is also highly credit negative for the District," said Moody's.
In 2024, the district
"While taxpayers/investors should always consult with their tax advisors, I would say that the district's current tax treatment now mirrors that of the vast majority of states, thus making district municipal bonds more attractive to district residents, and likely adding further support to the new financing," said Lipton.
The deal is likely to score well with managers of separately managed accounts.
"Investor reception and appetite for the new District bond issue is likely to be strong, with active SMA interest seeking attractive yields, customization, active management, as well as a willingness to book duration extensions as a way to capture additional yield," said Lipton.
Since 2009 the city's debt is capped at a self-imposed limit of 12% with GO debt service capped at 17% of local revenues.
According to the investor presentation, which includes all three sales, following the issuance of the bonds the city will have approximately $13.67 billion of tax-supported debt outstanding with an approximate debt service rate of 9.4% for fiscal year 2026.
The largest chunks of capital improvement project budgets will go to the District Department of Transportation accounting for 34%. Public schools account for 23% and funding the Washington Metropolitan Area Transit Authority will take 18%.
The outcome of the two sales may provide clues as to the possibility of another record-breaking year for bond issuance.
"We expect issuance to challenge the levels seen in 2025," said Pietronico. "A robust new issue market seems to be in the cards for 2026."
