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A Reason to Love the MTA

Due in part to ongoing fiscal challenges, New York’s Metropolitan Transportation Authority (MTA) bonds are currently trading at attractive levels. At 55 bps over comparable AAA bonds, 10-year MTA bonds rated A1 by Moody’s offers investors an opportunity to pick up some additional yield without significant credit risk.

As one the oldest and largest transportation networks in the U.S., the authority remains a vital part of New York’s infrastructure and an essential component of commuting for New York, New Jersey, and Connecticut residents. Despite structural deficiencies, Governor Andrew Cuomo, Mayor Bill de Blasio, and many other local leaders are heavily invested in the ongoing success of the MTA. A recent 10-Point Plan to transform and fund the MTA has significant support from both parties. For those who can handle modest credit risk and a bit of spread volatility, MTA bonds offer a good entry point.

As shown below, by selling out of 10 Yr AAA Georgia State GOs (cusip 373385CN) at a 2.17% yield and purchasing 10 Yr A1 MTAs (cusip 59261APZ) at a 2.72% yield, an investor can capture 55 bps of additional income with the same duration/interest rate risk.


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