Savvy Investors Flock to Bills' Tax-Exempt Bonds, Scoring Big Wins

In a remarkable turn of events, Buffalo Bills fans have not only celebrated a resounding victory on the field but have also emerged as triumphant players in the municipal bond market. The construction of a new $1.7 billion stadium for the National Football League team in Orchard Park, New York, has presented a unique opportunity for savvy investors to capitalize on the tax-exempt status of the debt offering.

Unlocking Unparalleled Yields for High-Tax Bracket Investors

A Rare Opportunity for Tax-Savvy Investors

The recent debt sale by Erie County to finance the construction of the new Bills stadium has caught the attention of a select group of investors – those in the highest tax bracket. The bonds, which are exempt from state and federal income taxes, have offered a tantalizing yield that is hard to match in the current market landscape. For top-tier taxpayers in New York, where the highest levy stands at a staggering 10.9%, this debt offering has presented a rare chance to lock in high returns without taking on substantial credit or liquidity risks.

Outperforming Taxable Alternatives

The tax-exempt nature of the Bills bonds has made them an attractive investment option for high-net-worth individuals. According to an online tool from Eaton Vance, part of Morgan Stanley Investment Management, the 20-year bonds, priced to yield 3.45%, are equivalent to a taxable yield of 7.1% for the wealthiest New Yorkers. This means that even a similarly-dated U.S. Treasury, currently trading at around 4.18%, would struggle to compete with the after-tax returns offered by the Bills' debt.

Overwhelming Demand from Retail Investors

The appeal of the Bills bonds has not gone unnoticed by the team's passionate fan base, dubbed the "Bills Mafia." During the retail-order period on Monday, roughly 100 individuals placed bids for the debt, totaling approximately $2.7 million out of the $110 million sale. This level of retail participation is a testament to the strong demand from mom-and-pop investors who were eager to secure a piece of the tax-exempt offering before institutional pricing on Tuesday.

A Coveted AA-Rated Credit

Adding to the allure of the Bills bonds is their AA rating from S&P Global Ratings, the third-highest grade available. This high-quality credit rating, coupled with the tax-exempt status, has made the debt particularly attractive to investors seeking a balance of safety and yield. Despite the short-term nature of the maturities, the bonds were priced with yields lower than top-rated benchmark bonds, indicating the strength of demand for this unique offering.

Capitalizing on Market Dynamics

The timing of the Bills bond sale has also played a role in its success. According to Max Christiana, a portfolio manager at Belle Haven Investments, the heavy demand was partly due to the fact that a recent sale by New York City's water utility lacked short-dated maturities, creating additional appetite for the Bills' debt structure.

A Winning Combination for Savvy Investors

The combination of tax-exempt status, attractive yields, and a high-quality credit rating has made the Bills bonds a compelling investment opportunity for high-tax bracket investors in New York. As James Pruskowski, chief investment officer at 16Rock Asset Management, aptly stated, "For top tax-rate payers in New York, this was hard to pass up." The Bills' triumph on the field has now extended to the municipal bond market, where their fans have scored another impressive victory.