Citi loses key municipal bankers to Jefferies
Citigroup Inc, one of the leading underwriters of municipal bonds in the U.S., has lost several senior bankers to Jefferies Financial Group Inc, as the latter seeks to expand its presence in the public finance market, according to a Bloomberg News report.
The departures include John Medina, who was the head of Citi’s municipal banking group, and Michael Lexton, who was the co-head of the group’s transportation and infrastructure team. Both of them joined Jefferies as managing directors in its public finance investment banking division, along with four other bankers from Citi.
The move comes amid a turmoil in Citi’s municipal banking department, which has been under scrutiny for its role in a controversial bond deal for the city of Detroit in 2014. The deal, which involved swapping variable-rate debt for fixed-rate bonds, resulted in a $377 million loss for the city and triggered a federal investigation.
Jefferies aims to grow its municipal bond business
Jefferies, which is known for its focus on mid-market clients and sectors such as technology, healthcare and energy, has been ramping up its municipal bond business in recent years. The firm hired more than 20 bankers and traders from RBC Capital Markets in 2019, and added another 10 bankers from Stifel Financial Corp in 2020.
Jefferies ranked 14th among the top municipal bond underwriters in the U.S. in 2020, with a market share of 2.3%, according to Refinitiv data. The firm underwrote $8.4 billion worth of municipal bonds last year, up from $4.7 billion in 2019.
Jefferies’ chief executive officer, Rich Handler, said in a statement that the firm is committed to growing its public finance platform and providing comprehensive solutions to its clients. He welcomed the new hires from Citi and said they bring “deep expertise and relationships” in the municipal market.
Municipal bond market sees strong demand and issuance
The municipal bond market, which is used by state and local governments, agencies and non-profit organizations to finance public projects and services, has seen strong demand and issuance in the past year, driven by low interest rates, fiscal stimulus and investor appetite for tax-exempt income.
According to the Bond Buyer, a trade publication, municipal bond issuance totaled $474.6 billion in 2020, the second-highest annual volume on record, after $491.6 billion in 2017. The issuance was boosted by a surge in refunding deals, which allow issuers to refinance their existing debt at lower interest rates.
The demand for municipal bonds has also been robust, as investors seek safe and stable returns amid the economic uncertainty caused by the COVID-19 pandemic. The municipal bond market has also benefited from the Federal Reserve’s support, which included buying short-term municipal notes and providing liquidity to the market.
The outlook for the municipal bond market remains positive, as the Biden administration’s infrastructure plan and the American Rescue Plan Act, which provides $350 billion in aid to state and local governments, are expected to spur more spending and borrowing by public entities.
Category: Business
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