NYC Borrowing Cost Falls 11% With Year’s Biggest Bond (Correct)
New York City Borrowing Cost Falls 30% Bond
Daniel Acker/Bloomberg
John Liu, New York City comptroller.
John Liu, New York City comptroller. Photographer: Daniel Acker/Bloomberg
(Corrects amount of issue in story originally published on July 27.)
New York City cut its borrowing cost 11 percent in selling about $963 million in bonds, about 20 percent more than planned, in the municipality’s biggest tax- exempt offer of 2010.
The third-largest U.S. municipal borrower, which had scheduled an $800 million offering, benefited from a shortage of new tax-exempt issues, driving down the extra interest investors demanded over top-rated debt to buy the securities.
“It’s a name that everybody knows, it’s like the Bond of the Month Club,” said Fred Yosca, head of fixed-income trading at BNY Mellon Capital Markets LLC in New York. There are “so few deals, so little tax-exempt supply in the market,” he said before the sale was completed.
The 10-year general obligations, rated third-highest by the three major rating companies, were priced to yield 3.1 percent, up from 3.05 percent during sales to individual investors yesterday, according to a person familiar with the deal.
The extra yield investors demanded for the city’s debt is 24 basis points above top-rated comparable debt, down from 27 basis points in June, according to data from Municipal Market Advisors, an independent research firm in Concord, Massachusetts. A basis point is 0.01 percentage point.
“This sale was an enormous win for investors, New York City taxpayers and for the overall market,” Comptroller John Liu said. “We sought out to sell $800 million, and saw an opportunity to kick it up to close to a billion dollars and in the process saved the tax payers a good chunk of change.”
Range of Maturities
New York City offered maturities ranging from 2011 through 2037, with yields from 0.3 percent to 4.39 percent, city officials said in a release.
The 27-year yield compares with AAA debt yielding 4.34 percent, a premium of 5 basis points over a comparable MMA index. The last time the city sold 27-year debt, in May 2009, the yield was 4.97 percent, a premium of 18 basis points.
The cost of insuring $10 million for five years of New York City debt against default fell yesterday to 200.7 basis points, or $200,700, the lowest in six weeks, according to CMA DataVision.
Yields on top-rated, tax-exempt general obligations that mature in 10 years averaged 2.86 percent today for a fifth consecutive day, the lowest since at least January 2001, according to MMA data. The securities have not had an increase in yields since June 15.
Low Yields
Low yields haven’t kept investors out of the municipal market, according to Evan Rourke, a portfolio manager with Boston-based Eaton Vance Corp., who helps oversee about $9 billion in municipal holdings.
“Absolute yield levels are low especially when considered relative to recent history, but inflation is also low, so you’re actually seeing larger real returns,” Rourke said. U.S. inflation, excluding food and energy prices, has held at a 44- year low since April.
New York City, whose general obligations are rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch Ratings, will use the proceeds of the sale to refinance existing debt, according to preliminary offering documents.
To contact the reporters on this story: Brendan A. McGrail in New York at bmcgrail@bloomberg.net; Simone Baribeau in New York at sbaribeau@bloomberg.net
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