Texas A&M University System
Revenue Financing System Bonds, Series 2022
September 27, 2022
The 2022 Bonds were used for the purpose of providing funds for eligible projects for participants within the System and refunding a portion of the Board’s outstanding Commercial Paper Notes. This was the first time SWS served as senior manager to the System. TAMUS is rated AAA/Aaa/AAA by S&P, Moody’s and Fitch, respectively. Series 2022 Bonds included serial bonds from 2023 to 2043 with term bonds in 2047 and 2052.
Leading up to pricing, extreme volatility persisted in both the municipal and Treasury markets. At the FOMC meeting on September 21, 2022, the Fed hiked by 75bp, as expected, and anticipates a further 125bp in hikes this year, and one hike next year, which lead to volatility in the market after the announcement in both treasuries and municipals. The calendar for the week of September 26 had $3.2 billion of negotiated deals and $3.5 billion of competitive issuances, of which almost half of all negotiated issuances was in Texas. Economic concerns in England following their government’s announcement to cut taxes, despite rising inflation, contributed to the weakness in the US Treasury market. The volatility in the market was further exemplified in MMD movements seen between mailing and pricing. In that time frame rates increased 45 bps in 5 years, 31 bps in 10 years, and 18 bps in 30 years.
Given the volatility in the market and a large Texas issuance on Wednesday, September 28, 2022, SWS and the System’s financial advisor recommended to accelerate the issuance in light of market volatility and the heavy calendar. SWS led the development of the investor roadshow which was viewed by 53 different investors of which 13 participated in the bond sale by putting in investor orders. Given the volatility of the market leading up to pricing, SWS lead weekly market update calls in September to discuss with the System and its financial advisor marketing strategies and what the market tone would be leading up to pricing. SWS pre-marketed the transaction on Tuesday morning (September 27) amidst significant market volatility, allowing SWS to acquire critical feedback that allowed SWS to enter the market mid-day.
Despite a choppy market, SWS generated $766 billion in priority orders from 42 different investors (3.7x oversubscription) - 20 of which did not previously report TAMUS holdings. In addition, the System received $3 million of retails orders. At re-pricing, SWS tightened spreads by 2-5 bps on all maturities besides, 2038 – 2043 and 2052 despite the end of day MMD increases of 7 – 8 bps.