Northeast municipal volume took hardest fall of any region in 2023

Municipal bond issuers in the Northeast sold $89.3 billion of debt in 2023, a 14% year-over-year drop that drove the national market into negative territory.

Muni issuance in the region’s 11 states, two territories and the District of Columbia came in more than $14 billion below 2022 numbers, according to data from LSEG, formerly Refinitiv, in a year when the nation as a whole was down less than $7 billion, dropping 1.7% to $284.7 billion.

The Southeast was the only other region where volume fell year-over-year, by a less precipitous 6.8%.

Half of the regional decline came from New York state, where issuers sold $42.26 billion of debt, a 15.4% drop that put the state down more than $7 billion year-over-year despite hosting some of the nation’s largest issuers.

Muni issuance was down in eight Northeast states and up only in three of the smallest: Vermont, Rhode Island and Delaware.

The District of Columbia gained 4.2% to $3.95 billion, while $64 million of sales were recorded in Puerto Rico and none in the U.S. Virgin Islands.

Trailing New York was Pennsylvania, where $12.04 billion was sold to almost break even year-over-year, recording a 0.1% drop.

The fall was steeper in third-ranked Massachusetts, where issuance plunged more than 31% to $8.68 billion. Number four New Jersey saw a 3.3% volume drop to $7.62 billion and Connecticut hit the top five with $5.08 billion sold, down 12.6%.

Gotham City led the way in the Northeast, where one of its financing arms, The New York City Transitional Financing Authority, was the top issuer in the region, credited by LSEG with $6.97 billion of bonds sold over 11 deals.

New York City itself was not far behind with $5.42 billion sold. The Triborough Bridge and Tunnel Authority, an arm of the New York Metropolitan Transportation Authority, sold $4.95 billion, and the New York State Dormitory Authority sold $4.72 billion.

“Sixteen transactions of $1 billion or more were brought to market during the year,” said John Hallacy, founder of John Hallacy Consulting LLC. “The list was dominated by New York State and New York City-level issuers. The only other names on this list were for Massachusetts and Connecticut.”

Around the nation, only California’s state government, with $8.57 billion, sold more than the Northeast’s top four issuers. Massachusetts was fifth in the region, with the commonwealth’s government selling $3.21 billion.

“No doubt rates were a major consideration on the issuance side, but the levels did not prevent these larger transactions from being successfully completed,” Hallacy said.

Among the larger sectors tracked by LSEG in the Northeast, only housing saw volume rise in 2023, up 7.1% to $11.07 billion.

General obligation bond issuance dropped by 16.8% last year compared to a decline of 12.5% for revenue bond sales, Hallacy noted.

“One of the challenges for the GOs of the region is that they are already widely held. New names or names with less par outstanding are somewhat preferred,” Hallacy told The Bond Buyer.

Transportation issuance was off more than 30% to $17.02 billion, and sales for education were down more than 15% to $12.39 billion.

The region’s lagging issuance may have already turned a corner, though.

Issuance was down substantially year-over-year in the first three quarters — between 21.3% and 30.7% — but the fourth quarter was another story, with issuance up 29% compared to the fourth quarter of 2022, reaching $31.15 billion.

And one of the region’s largest traditional issuers may be amping up its already considerable borrowing. Legal challenges may still pose roadblocks, but New York’s MTA expects to begin congestion price tolling on vehicles entering Lower Manhattan, with the goal of supporting new debt to help the authority meet its considerable infrastructure needs.

Those needs can’t be ignored, Municipal Market Analytics wrote in an outlook piece earlier this month.

“The only option that seems unlikely now — and for the foreseeable future — is not coming up with a way to support the operational and capital needs of the MTA,” MMA analysts wrote. “Failure to do so would put the economy of the city at risk, which is untenable given its nearly 60% contribution to the state’s GDP and around 5% to the national economy.”

And municipal market insiders are increasingly confident — particularly given the Federal Open Market Committee’s telegraphing that its rate increases have stopped and are apt to become cuts sometime this year — that overall volume will begin to rise in 2024.

League tables
BofA Securities claimed the top spot among Northeast senior managers, as it did nationwide, credited by LSEG with underwriting $14.37 billion over 89 deals in the region.

In second place, in what amounts to a swansong, was Citi, with $9.06 billion. The firm announced late last year that it would exit municipal bond underwriting.

The firm was among those to come under fire in other parts of the country for not following the GOP political line on guns and fossil fuel proliferation, losing the right to underwrite in Texas, the top muni market in the nation in 2023.

Its absence will be felt in the Northeast, where it was a top five firm in several states.

Taking the third spot in the region was Jefferies, with $8.45 billion, followed by RBC Capital Markets at $7.02 billion and Wells Fargo at $6.39 billion.

Bryant Rabbino led among the region’s bond counsel, credited with $9.44 billion on 32 deals.

It was followed by Norton Rose Fulbright at $7.62 billion, Nixon Peabody at $6.76 billion, Orrick Herrington & Sutcliffe at $6.2 billion and Hawkins Delafield & Wood at $4.77 billion.

Public Resources Advisory Group claimed the top place among financial advisors, credited with $15.996 billion on 65 issues, followed by PFM Financial Advisors at $12.04 billion.

New York City and related issuers supplied most of the biggest municipal bond deals in the Northeast in 2023.

Bloomberg News

In third was Acacia Financial Group with $8.94 billion, Frasca & Associates with $8.35 billion and housing finance agency specialists Caine Mitter & Associates following with $3.63 billion.

One of Citi’s parting municipal market efforts came in November, when it led the largest deal sold in the Northeast in 2023, the $2 billion financing of the Terminal One project at John F. Kennedy International Airport in New York.

The deal, sold through conduit New York Transportation Development Corp., is one piece of the financing for the $9.5 billion development of the terminal at the southern entrance of the airport.

The bonds, with interest subject to the alternative minimum tax, came with a verified green bond designation and an insurance wrap from Assured Guaranty on $800 million.

Strong demand led the transaction to be upsized by $500 million, according to a news release by the developers.

Chip Barnett contributed to this story.

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