DC Readies $1.2 Billion Bond Sale as Credit Stabilizes Post-DOGE
Washington, DC is stepping up to borrow $1.2 billion this week at its annual municipal debt sale, tapping the market as its credit stabilizes.
A portion of the proceeds will go toward the district’s six-year capital plan, which includes financing for the Washington Metropolitan Area Transit Authority as well as an infrastructure fund tied to redevelopment at the former site of Robert F. Kennedy Memorial Stadium. Some of the funds will also go toward public schools and the police department.
The offering comes as Washington’s credit outlook stabilizes after a downgrade to Aa1 from AAA by Moody’s Ratings last year prompted by federal funding cuts stemming from the now-defunct Department of Government Efficiency, or DOGE, and vows from the Trump administration to slash its government staff.
In April, Moody’s revised its outlook on the district to stable from negative, citing its “very strong fiscal governance and prudent budget management.” The credit rating company said Washington may be in line for an upgrade if private sector growth offsets the federal job losses.
Dora Lee, director of research at Belle Haven Investments, said last year’s uncertainty was now “baked into” investor calculations and that the reduction of headline risk around DOGE has taken pressure off of the credit.
On top of that, the bonds, backed by revenue from income taxes, “have always been very popular in the retail space,” she said. “The fact that the retail investor base has less opportunities for and less supply of DC exempt paper should drive up demand even more,” Lee added.
The sale is expected to price on Tuesday and will be led by Ramirez & Co. and RBC Capital Markets. At last year’s offering, the district sold 10-year bonds as part of the sale, which are currently yielding roughly 3.3%.
The office of the district’s CFO declined to comment before the bond sale.
The district’s deal adds to a deluge of supply seen in the muni market this year, on top of last year’s record levels. Issuance so far has totaled about $321 billion, a roughly 4% increase in supply from the same time period last year, according to data compiled by Bloomberg. First-half sales reached about $295 billion, the biggest haul in the 10-year period.
While Lee at Belle Haven expects strong retail demand, others say this year’s slew of sales mean there will need to be yield concessions on some deals.
“The muni market in certain pockets feels a little on the heavy side right now, and so I think some deals have to come to market with an appropriate concession, especially if it’s a name that’s more widely held, Jamie Iselin, managing director at Neuberger Berman, said. The DC bonds may fit into that camp, he said.
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