Strong Demand for Washington State Bonds

The Office of the State Treasurer sold $528.8 million in bonds on Tuesday, September 26th. The bonds were split into three sales: one sale of new money general obligation bonds, a second sale of taxable general obligation bonds and the third sale of refunding general obligation bonds. The refunding sale of approximately $57 million will reduce interest rate costs to the State by over $6.6 million.

New money general obligation Bonds. By far the day’s largest sale was $435,025,000 in new money General Obligation Bonds. These were sold to Citigroup Global Markets. That total is made up of $334,010,000 in State of Washington Various Purpose General Obligation Bonds, Series 2018A and $101,015,000 in State of Washington Motor Vehicle Fuel Tax General Obligation Bonds, Series 2018B. The sale generated robust interest, with five bidders competing. Citigroup was the lowest with a true interest cost (TIC) of 3.364063%, J.P. Morgan was second with a TIC of 3.382604%. The Motor Vehicle Fuel Tax General Obligation, Series 2018B bonds will be used to finance transportation projects around the state such as SR 99 through Seattle and improvements to the North Spokane Corridor (U.S. 395), while the Various Purpose General Obligation Bonds, Series 2018A will be used to primarily fund K-12 school renewal and replacement projects, and facilities for State universities, community and technical colleges. The average life for Series 2018A is 16.654 years and for Series 2018B is 15.342 years.

Taxable. The State of Washington General Obligation Bonds, Series 2018T (Taxable) also generated robust investor demand. Wells Fargo was the lowest of 11 bidders for $36,725,000 of taxable bonds. Wells Fargo’s TIC bid was 1.746632% while J.P. Morgan Securities was second at 1.792084%. The average life of the bonds is 2.418 years.

Refunding. The final group of bonds sold were State of Washington Various Purpose General Obligation Refunding Bonds, Series R-2018A ($27,530,000) and R-2018B ($29,530,000). These bonds were sold as a group, worth $57,060,000. Morgan Stanley had the winning bid at a TIC of 1.21951%. Citigroup, at 1.220331% was the second lowest of the five total bidders. For R-2018A this refunding will save the state $3,008,813 in interest costs (net present value). Of that $876,194 will be saved in the 2017-19 biennium. For R-2018B net present value savings are $3,456,298. Savings for this biennium are $947,160. The average life of the 2018A bonds is 2.915 years and of the 2018B bonds is 3.125 years.

Treasurer Duane Davidson noted, “These are very positive results – there was very strong demand on each of these competitive sales and we’re pleased with the interest rates obtained and the refunding savings secured.”

The State’s bond ratings were reaffirmed last month with no change by the three major ratings agencies (Aa1/AA+, AA+) with a stable outlook.


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