Five of NHA’s clients were in the market over the past month, and while overall interest rates are still historically low (3.0-3.3%), there appears to be growing “investor fatigue” and many of the “go-to” investors are showing waning capacity to purchase more POBs.
As shown in the sampling above of recent NHA public offering pension deals, interest rates (blue bars) and credit spreads (orange line) have fluctuated widely. Credit spreads (20-25 year pension bond maturity vs. 30-year TSY) started at around the +225 bps last spring, then hit all time lows this past January (<+95 bps) but have jumped quickly back to the +140/150 bps range in recent months given the reduced demand from investors and the Fed’s tapering of its bond purchases.
Also indicative of reduced demand are dropping investor subscription levels for these recent pricings (teal boxes above). It will be interesting to see if there is another market rally in early 2022 (like in 2021) or if the growing wave of pension bonds continues and becomes even more difficult for the market to absorb.