State officials pleased with $1.6 billion bond sale, after weeks of worry over credit downgrade

by Sam Gauntt, Maryland Matters
June 12, 2025

Maryland “did very well” in the sale Wednesday of about $1.6 billion in bonds, state officials said, despite a recent credit downgrade that rattled their confidence and raised fears of higher costs.

The Maryland Board of Public works on Wednesday voted to approve the sale of about $1.6 billion worth of bonds at a true interest cost of 3.55% and premiums of more than $125 million, according to a statement from the Maryland Treasurer’s Office.

It’s impossible to compare one year to another because of shifting markets and the many factors that go into a sale, said Treasurer Dereck Davis after the board meeting. But last year, by comparison, the state sold about $1 billion of tax-exempt bonds with about $151 million in premiums, his office said.

The bond sale was the first since ratings agency Moody’s downgraded Maryland’s creditworthiness in May from AAA to Aa-1, the second-highest rating. The other ratings agencies, Fitch and Standard & Poor’s, reaffirmed their AAA ratings for Maryland. But it was the first time in decades that the state went into a bond sale without AAA ratings from all three agencies.

The downgrade could have meant less interest from banks or higher interest on the bonds. But Davis said the bond sale went as expected, and that the state’s bonds are “as desirable as they’ve always been.” Each group of bonds sold Wednesday received six bids, he said.

During the meeting, the board sold packages of general obligation bonds to four New York firms: $485.2 million to Jefferies LLC; $414.8 million to the Bank of America’s BofA Securities, $362 million to Morgan Stanley & Co. LLC; and $294.7 million to J.P. Morgan Securities LLC.

In the statement, Davis said the sale represents “the strong demand for Maryland’s bonds and continued investor confidence in the fiscal strength and creditworthiness of our state.”

Baltimore economist Anirban Basu said the market had a “strong reception” to the bonds, given the significant uncertainty regarding U.S. stocks and equities, and because the state was still rated AAA by two other agencies.

“So the penalty for Maryland’s credit rating downgrade is extremely small at this time,” said Basu, president of the Sage Policy Group. But the state’s economy is still heading in the wrong direction, he said, as the state’s budget continues to grow without the tax base increasing accordingly.

Moody’s attributed its downgrade to the state’s economic underperformance compared to other AAA-rated states. The agency expects the underperformance will continue given Maryland’s high fixed costs and “heightened vulnerability to shifting federal policies and employment,” it said in a statement announcing the decision in May.

Maryland had almost 270,000 residents employed by the federal government in 2023, making the state particularly vulnerable to federal cuts by the Trump administration. Basu said that for years the state’s economic focus has been “eds, meds and feds”: educational services, medical research and delivery, and federal employment and contracting.

“We’re institutional,” he said. “And therefore, because we are institutional, we are stable.”

But now that education, medicine and federal employment are under pressure, the state needs to attract significantly more private investment — something Maryland is struggling to do with its high tax rate, Basu said.

But Senate President Bill Ferguson (D-Baltimore City) said the state is “seeing the uncertainty created by the Trump administration really create chaos.”

“Maryland is feeling the repercussions of that,” Ferguson said Wednesday.

The state maintaining its stable AAA from its other two agencies prevented it from seeing a “hugely negative impact,” Ferguson said. He added the state is “as stable as can be given our reliance on the federal government.”

Maryland Comptroller Brooke Lierman, who is a member of the board but was not present at Wednesday’s meeting, declined through her office to comment on the bond sale.

At the conclusion of the bond sale, Gov. Wes Moore (D) said that “the state did very well.”

“There’s no reason for us to be Moody today,” he said.

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