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Urge for food Maryland’s credit is about for one more take a look at Oct. 8 because the Division of Transportation involves market with over $800 million supplied in a aggressive sale as required by statute.
“Beneath Maryland state regulation, the Division’s bond points are most well-liked to be carried out on a aggressive foundation until the Secretary determines that extraordinary market situations exist,” mentioned David Broughton, media relations supervisor for MDOT’s Workplace of Public Affairs.
“Primarily based on current profitable aggressive gross sales, the Division didn’t really feel the necessity to request an exception for these bonds.”
The sale is split into two tranches, with $345 million designated as Consolidated Transportation Bonds Sequence 2025B. The second half accounts for $497.7 million of Consolidated Transportation Bonds Sequence 2025C Refunding. All of the bonds are tax exempt with an 8-year par name.
Any new paper popping out of Maryland is nicely scrutinized for indicators of bother ever for the reason that state was knocked by a credit score downgrade to its issuer ranking, and Common Obligation bonds to Aa1 from Aaa by Moody’s Rankings in
“The bonds ought to obtain sturdy institutional reception regardless of an earlier downgrade on the state in addition to on linked DOT bonds,” mentioned Jeff Lipton, The Bond Purchaser’s market intelligence analyst for municipals.
“Buyside credit score approval shouldn’t be a heavy carry given the statutorily imposed basket of irrevocably pledged, state-collected taxes and costs earlier than being made obtainable for different makes use of, topic to deposit to the state’s Transportation Belief Fund and exhibiting a confirmed assortment observe document.”
Proceeds from the 2025 B Bonds will present a portion of the capital funds wanted for the Consolidated Transportation Program. Proceeds from the 2025 C Bonds can be used to refund sure maturities of excellent Consolidated Transportation Bonds.
McKennon Shelton & Henn LLP in Baltimore is serving because the bond counsel, Davenport & Firm LLC are the municipal advisors.
The deal is rated AAA by S&P International Rankings, Aa1 by Moody’s Rankings and AA+ by Fitch.
“The ranking displays restricted progress prospects for the varied devoted taxes and strong resilience of the construction to financial declines,” mentioned Fitch. “Fitch’s evaluation relies on most anticipated leverage for all bonds that would draw on the devoted taxes.”
Market watchers are predicting the bonds could have a easy trip. “The market response must be comparatively sturdy as there may be not an amazing secondary market float of Maryland paper presently,” mentioned Michael Pietronico, founding associate at Miller Tabak Asset Administration.
Going with a aggressive sale may additionally present a clearer image of demand available in the market.
“To the extent there may be any give within the pricing of the bonds, logic would dictate it will likely be much less within the case of a aggressive sale of an excellent identify than a negotiated difficulty,” mentioned John Mousseau, vice chairman and CIO for Cumberland Advisors.
The present federal authorities shutdown may additionally play a task.
“A cursory have a look at authorities shutdowns that final greater than 10 days are inclined to replicate a drop in rates of interest, a minimum of by the ten-year Treasury,” Mousseau added.
“If in case you have this backdrop, it will improve demand by buyers’ outlook of a directional commerce and demand for prime quality issuers.”
MDOT’s final foray into the market was profitable.
“The Division efficiently offered $200 million of Consolidated Transportation Bonds competitively in June with 5 underwriters submitting bids,” mentioned Broughton.
“All bids obtained had a low-high True Curiosity Price unfold of lower than 9 foundation factors.”
The profitable gross sales of the previous and the current are occurring below darkish monetary clouds emanating from close by Washington D.C. as a result of Trump administration’s efforts to chop the federal workforce.
The Maryland Affiliation of Counties pegs the quantity at 15,000 misplaced federal jobs since January. Governor Wes Moore can be
The municipal bond market is flying excessive as main market municipal issuance is on observe to set one other document in 2025, and October gross sales are anticipated to exceed $50 billion.
“This tightening provide surroundings for the top of the yr means buyers will face extra competitors for high quality bonds,” writes Tom Kozlik, managing director and head of public coverage and municipal technique for Hilltop Securities. “Particular person buyers, particularly, could discover it more difficult to entry enticing choices.”
“For a lot of the yr, the market has demonstrated a willingness to soak up heavy provide and so this top of the range credit score ought to come at spreads reflective of the market and energy of the issuer,” mentioned Lipton.
