Primary heats up with big D.C. deal

The focus of the municipal bond market was on the primary, as the District of Columbia brought $1.43 billion to market, while the Oklahoma Turnpike Authority picked a finance team; while Les Richmond, vice president and pension actuary at Build America Mutual opines about pension risks; and what else we’re covering.

And if you missed any of our ESG Week coverage, make sure to check our ESG special section which has all the articles, the podcast and a taped version of the Leaders event.

The District of Columbia is set to issue $1.43 billion of income tax-secured revenue bonds in a mixture of exempt, taxable and forward-delivery structures, coming into a market that recently has been favoring high-grade paper. The deal began pricing Tuesday. The $651.575 million of tax-exempt Series 2022A bonds saw the 10-year with a 5% coupon yield 2.77%, the 20-year with a 5% coupon yield 3.35% and the 25-year with a 5% coupon at 3.48%.

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The Oklahoma Turnpike Authority has assembled a financing team and is seeking approval from a state oversight council later this month for bonds to begin funding an expansion project that is the target of two lawsuits. OTA has asked the Oklahoma Council of Bond Oversight to consider up to $450 million of bonds for new capital projects and $50 million of refunding bonds at its July 28 meeting, according to Alexandra Edwards, the state’s deputy treasurer for debt management.

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In this commentary, Les Richmond writes: A higher inflation, higher interest rate environment will exacerbate pension-related risks to investors in U.S. state and local government bonds, moving those risks back center stage for the municipal market as the direct impacts of the COVID pandemic ease. From a bondholder’s perspective, pension risk refers to the possibility that pension costs can grow to such an extent as to impair an issuer’s ability to pay its debts: The risk rises as unfunded liabilities, and the budgetary requirements to pay for them, increase.

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Several Midwest states closed the books on fiscal 2022 this month with robust, even record-breaking revenue windfalls that swelled throughout the year. Illinois, Minnesota, and Ohio were among the states that ended the fiscal year on June 30 with flush coffers that exceeded projections — which in some cases had been lifted several times over the course of the fiscal year. Each state also warns that it is proceeding cautiously when it comes to the current fiscal year. Michigan, which closes its fiscal year Sept. 30, also has revised revenue estimates up multiple times.

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The Bond Buyer’s Rising Stars program’s return for a seventh year will include the inaugural inductions into The Bond Buyer Hall of Fame at an awards ceremony at the close of The Bond Buyer’s Infrastructure event November 15. Visit our website to make nominations in either category.

Munis have been steady to firmer in spots over the past few trading sessions as fundamentals have taken over. Triple-A 30-year munis dipped below 3% Tuesday, the first time since early June.