New York's MTA Sells Delayed $657 Million Issue as Yields Fall

The MTA’s issue, which was postponed Feb. 3 after a downgrade by Moody’s Investors Service, was the largest in the municipal market this week. The agency also sold $49.1 million in tax-exempt debt, for a total of $657 million. Even though the paper was graded four levels above junk by Moody’s, limited supply of tax-free income investments drove demand in what is slated to be the lightest week of new issuance this year.

“We don’t have any supply,” said Michael McKenna, a securities broker at GMS Group LLC in Livingston, New Jersey. “You’ve got some very unhappy municipal participants right now.”

President Barack Obama on Feb. 1 asked Congress to extend the federally subsidized Build America program, which has so far generated about $73 billion of taxable bonds for municipalities. States and local governments have sold or plan to offer $5.9 billion in securities this week, including $1.25 billion in BABs. Yields on AAA rated general obligations fell to 3.04 percent yesterday, the lowest this year, according to Municipal Market Advisors in Concord, Massachusetts.

“It’s opened up the credit markets for these states and municipalities,” McKenna said of Build America. “It’s been such a successful program.”