Proceeds from the multiple series will fund various parks, recreation, streets, utilities, facility, technology improvements, solar panels and refund select maturities from the City’s General Improvement & Refunding Bonds, Series 2014, Combination Tax and Revenue Certificates of Obligation, Series 2015 and General Improvement & Refunding Bonds, Series 2015.

The City received underlying ratings of Aaa (stable) from Moody’s, AAA (stable) from S&P and AA+ (stable) from Fitch.

The bonds, tax-exempt certificates and taxable certificates are structured as serial bonds in maturities 2/1/2026 to 2/1/2045 with a call date of 8/1/2035 @ par. The tax notes are structured as three maturities in years 2026-2028. The tax-exempt series used all 5% coupons.

Since the release of weaker than expected August employment figures, the municipal market rallied and outperformed treasuries in the week leading up to pricing, which featured a well absorbed $20 billion supply calendar, the second largest in the year so far. On Tuesday, the latest consumer-price report pleased investors, resulting in higher U.S. stock prices.

Overall consumer prices rose 2.7%, which was mostly in line with forecasts and maintained expectations that the Federal Reserve would cut short-term interest rates in September.

On the morning of pricing, the producer price index jumped to 0.9%, the biggest monthly increase since June 2022, souring the optimism around a large September rate cut.

With Texas ISD issuance tapering off after a crowded July, the City’s Obligations would price the same week as other non-school district transactions, namely Fort Bend County’s general obligation issuance with similar multiple series as well as Alamo Community College District. SWS closely monitored investors’ reception to Fort Bend County while also obtaining 23 investor reads for the tax-exempt portion and 5 investor reads for the taxable piece during premarketing.

SWS’ head underwriter opted to using all 5% coupons on the tax-exempt piece, noting that investors would still receive enough premium protection. In consultation with the City’s co-municipal advisors, SWS put out a premarketing wire that was 2 bps tighter in maturities 2038-2045 than Fort Bend County.

At preliminary pricing, SWS’ desk adjusted yields in years 2031-2042 to elicit more interest from investors.

Despite a weak tone, the SWS-led syndicate secured $855 million in orders from 41 investor accounts. Overall, the tax-exempt portion was 2.1x oversubscribed while the taxable portion was 3.4x oversubscribed.

At reprice, SWS’ head underwriter recommended yield adjustments, with reductions in spreads for maturities 2026-2028 and 2039-2045 ranging from 1 to 4 basis points. Overall, the City achieved an All-in-TIC of 3.98%. On the refunding component, the City achieved Net PV savings of $2.96 million (3.474% of refunded par). SWS used its robust balance sheet to underwrite $31.755 million in bonds.

Refunding escrow efficiency was enhanced by employing a strategic redemption date strategy whereby refunded bonds with 5% coupons are called at the earliest possible date and bonds with sub-5% coupons have a 90-day escrow in order to take advantage of the higher SLGS rate.