New York State Dormitory Authority

The Dormitory Authority of the State of New York and New York City both saw billion-dollar-plus deals oversubscribed. 

The DASNY program allows the schools to "align their borrowing costs with the aid that they receive from the state," said CEO Robert J. Rodriguez. 

"With strong demand, rate cuts and favorable technicals, the muni market — outside of an unexpected shock — is set up to perform well over the next couple of months," said Daryl Clements, a municipal portfolio manager at AllianceBernstein.

New York state's issuers topped the Northeast charts as issuance rose in nearly every sector of the market during the first half of 2024.

The sale reflects the strength and demand of New York state paper.

"The news is sparking an equity market selloff while sending bond yields to the stars as investors dial down their Fed easing expectations again, this time to only two rate cuts this year," said José Torres, senior economist at Interactive Brokers.

"DASNY's financing, construction and grants management on behalf of science, health and educational not-for-profits [are] the foundation for stronger, inclusive and more sustainable communities across the state of New York," said Robert J. Rodriguez.

Two mega deals recently priced with make-whole calls for bonds due in 2034 and shorter where the market does not appear "to be penalizing issuers for including an optional make whole call feature in the short maturity tax-exempt bonds," said Pat Luby, head of Municipal Strategy at CreditSights, in a report.

With a dearth of taxable muni supply and Build America Bond refundings, the university should see strong demand for this week's $500 million taxable corporate CUSIP bonds.

Despite several larger deals entering the primary, the vast amount of cash on hand has not allowed munis to cheapen amid UST volatility and ultra-rich ratios

"The muni AAA [high grade] curve has been relatively steady thus far in March, but lags relative to the broader fixed income market after sizable muni outperformance in February," said J.P. Morgan strategists. 

High-yield and taxable munis continue to outperform, supply grows but concentrates in larger deals led by $3 billion of state personal income tax revenue bonds from the Dormitory Authority of the State of New York next week.

There hasn't been a huge return of capital in the muni market so far this year, with fund flows being rather anemic, said Chad Farrington, co-head of municipal bond strategy at DWS Group.

While supply this week is "softer," uncertainty and volatility may prevail once more due to "yields still not exciting longer-term investors," said Matt Fabian, a partner at Municipal Market Analytics.

Munis have had a slow start "down roughly 0.25% for the first week of September bringing year-to-date returns to 1.34%," said Jason Wong, vice president of municipals at AmeriVet Securities.

"Weaker performance is in part driven by higher permanent labor costs," Moody's said. "These elements highlight rising human capital and financial strategy risks under Moody's ESG classification and are key drivers of this rating action."

J.P. Morgan held a one-day retail order for $1.65 billion of revenue bonds from the Dormitory Authority of the State of New York, while Minnesota sold $1.02 billion of GOs in the competitive market in five deals.

For the coming week, investors will be greeted with a larger new-issue calendar led by large New York and Texas ISD issuers, along with gilt-edged Minnesota selling competitively.

The CPI numbers coming in pretty much as expected "was a relief" to the markets, with the bond market rallying after the release, said Luke Bartholomew, senior economist at abrdn.

"The large taxable refunding or combined transactions were accomplished earlier in the year when rates were relatively low," says John Hallacy.