NYC Bonds

In September 2011, New York City and its related issuers sold two fixed rate bond issues, including New York City Municipal Water Authority’s first ever competitive bond offering, as well as floating rate bonds for the Water Authority. Two swaps were also unwound for a profit.

On September 13, the New York City Municipal Water Finance Authority (NYW) sold, via competitive bid, $451 million of second resolution, fixed-rate, tax-exempt new money and refunding bonds. NYW received nine bids for the bonds and Citi was the winning bidder. The longest maturity was in 2044 and was priced at a yield to call of 4.080%. The issue included $250 million of new money and $201 million of refunding bonds. Read the Press Release

The City typically sells bonds through a negotiated bond sale process; however in strong and stable markets, a competitive bond sale can give us new benchmarks for bond pricing and allows firms that are not senior managers to compete to buy the bonds. In addition, the NYW bonds offered were not in maturities where there is currently substantial retail demand, so foregoing the pre-sale retail order period typical of our negotiated bond sales was not detrimental. It is the policy of Comptroller John C. Liu to encourage competition and we look for opportunities where beneficial.

The City also seeks to maintain a mix of fixed and floating rate debt for most City credits. To this end, NYW also priced $200 million of new money daily reset variable rate bonds with a Mizuho Corporate Bank, Ltd. Standby Bond Purchase Agreement for liquidity. The bonds are remarketed by Barclays Capital and Wells Fargo Bank, National Association. The interest rate for the initial period was set on September 29, 2011 at 0.10%.

Near the end of the month, New York City sold $674.2 million of tax-exempt fixed-rate General Obligation (GO) bonds in a negotiated sale led by book-running senior manager Siebert Brandford Shank & Co. The September 27th sale also included $65 million of taxable fixed-rate GO bonds sold by competitive bid and won by Citi. Despite the market volatility of the second half of the month, reflecting the changing news from Europe and the Federal Reserve’s “Operation Twist,” the City was still able to take advantage of low absolute yields. The maximum yield October 1, 2036 term maturity sold with a yield of 4.125% at par. Read the Press Release

NYW and General Obligation new money bonds both finance projects in the City’s Capital Plan.

Additionally, New York City announced a $1 billion Hudson Yards Infrastructure Corporation (HYIC) new money bond sale, which is expected to price during the week of October 17, 2011. The proceeds will be used to pay for completion of the Number 7 Subway line extension from its current terminus at Eighth Avenue to the Hudson Yards Redevelopment Area, and for related infrastructure needs including park development and other amenities. Read the Press Release

On September 23, 2011, New York City terminated, at a profit, two forward starting interest rate exchange agreements entered into by the Dormitory Authority of State of New York (DASNY) on behalf of the City. Our swap reporting as of September 30th will be updated to reflect this change.

On September 30th, the Comptroller’s Office introduced an enhanced, Investor Relations-focused Public Finance section of Comptroller Liu’s web site, including this new monthly wrap-up. We welcome your feedback on the site and suggestions for how we can make it more useful for both retail and institutional investors. And we thank you for your interest in New York City bonds!

Carol Kostik
Deputy Comptroller for Public Finance