New Jersey Prices $1.7B Transport Bonds at 3.95% to 5.28% Yields
New Jersey issued $1.7 billion in transportation bonds despite recent FOMC rate hikes, with yields ranging from 3.95% to 5.28%.
Key points
- New Jersey priced $1.7 billion in transportation bonds with yields between 3.95% and 5.28%.
- Rating agencies affirmed the debt one notch below the state’s general obligation rating.
- The state plans to issue another $1.9 billion in refunding bonds next month.
New Jersey Transportation Trust Fund Authority priced $1.7 billion in bonds last week. Yields ranged from 3.95% for 2035 maturities to 5.28% for 2056 issues.
Wells Fargo managed the deal alongside nine co-managers. The issuance occurred during Federal Reserve volatility, yet market conditions remained steady for the transaction.
Rating agencies affirm credit strength
All four major agencies rated the bonds one notch below the state’s general obligation rating. Moody’s assigned an A1, while S&P and Fitch both assigned an A rating.
KBRA upgraded the state’s general obligation rating ahead of the deal. This move reflected improved fiscal stability after decades of financial mismanagement in the state.
Investors seek higher tax-equivalent yields
Portfolio managers noted the 15-year bonds offered a 4.73% yield. This translates to an approximately 9% tax-equivalent return for investors in the top bracket.
Kim Olsan of NewSquare Capital called the pricing attractive compared to historical norms. She stated that yields above 4% are rare for this credit profile in recent years.
State appropriations back the debt
Fitch analysts confirm the bonds are backed by state appropriations rather than dedicated taxes. The state can allocate sales tax revenue from car purchases to cover any shortfalls.
The trust fund has moved away from a previous debt spiral. Bond Buyer reports that sufficient funding has steadied the credit profile for future issuances.
The authority plans to issue $1.9 billion in refunding bonds in October. Proceeds from these deals will support the capital plans for NJDOT and NJ Transit.
