Muni Mar­ket Heads for a `Mea­sur­ing Stick’ Wed­nes­day

The Bond Buyer - - Market News - By Chris­tine AlBAno & AAron Weitz­mAn

Mu­nic­i­pal bonds weak­ened Tues­day as hand­ful of deals priced ahead of mar­ket-test­ing trans­ac­tions from Chicago and Los An­ge­les that are sched­uled for Wed­nes­day.

“To­day kind of came and went but to­mor­row should be in­ter­est­ing,” said one New York trader. “All eyes will be on the two head­lin­ers and with the weight of is­suance we should see to­mor­row, it will be one of those mea­sur­ing stick days.”

Siebert Cis­neros Shank & Co. priced Los An­ge­les’ $360 mil­lion of waste­water sys­tem sub­or­di­nate rev­enue green bonds and rev­enue re­fund­ing bonds. The deal is rated AA by S&P Global Rat­ings, Fitch Rat­ings and Kroll Bond Rat­ing Agency.

Ray­mond James & As­so­ci­ates priced Ohio’s $170 mil­lion of cap­i­tal fa­cil­i­ties lease ap­pro­pri­a­tion bonds and tax­able parks and re­cre­ation im­prove­ment bonds on Tues­day. The deal is rated Aa2 by Moody’s In­vestors Ser­vice and AA by S&P and Fitch.

In the com­pet­i­tive arena, the

Florida Depart­ment of Man­age­ment sold

$249.265 mil­lion of bonds. Wells

Fargo Se­cu­ri­ties won the bid­ding, with a true in­ter­est cost of

2.71%.

Mor­gan Stan­ley priced San Mat­teo Com­mu­nity Col­lege Dis­trict, Cal­i­for­nia’s $294.345 mil­lion of 2018 GO elec­tion of 2014 bonds on Tues­day. The deal is rated triple-A by Moody’s and S&P.

Bank of Amer­ica Mer­rill Lynch priced the city of River­side, Calif.’s $153.125 mil­lion of re­fund­ing sewer rev­enue bonds on Tues­day. The deal is rated A1 by Moody’s and AA-mi­nus by S&P.

On Wed­nes­day, Chicago will wrap up bor­row­ing un­der a $3 bil­lion sales tax se­cu­ri­ti­za­tion au­tho­riza­tion, af­ter dou­bling the deal to $1.3 bil­lion to al­low the city to beat ris­ing in­ter­est rates and com­plete the re­fund­ing pro­gram be­fore Mayor Rahm Emanuel ex­its in May. The deal is rated AA-mi­nus by S&P and triple-A by Fitch and Kroll Bond Rat­ing Agency.

JPM is also set to price the Depart­ment of Air­ports of the City of Los An­ge­les’ $714 mil­lion of sub­or­di­nate rev­enue bonds, fea­tur­ing both al­ter­na­tive min­i­mum tax and non-AMT bonds. The deal is rated AA by S&P and Fitch.

SE­CONDARY MAR­KET

Mu­nic­i­pal bonds were mostly weaker on Tues­day, ac­cord­ing to a late read of the MBIS bench­mark scale. Bench­mark muni yields rose as much as one ba­sis point in the two- to 18-year and 28- to 30-year ma­tu­ri­ties. The re­main­ing 10 ma­tu­ri­ties were either un­changed or low­er­ing by less than one ba­sis point.

High-grade mu­nis were mostly weaker, with yields cal­cu­lated on MBIS’ AAA scale in­creas­ing as much as a ba­sis point in the six- to 18-year, and 26- to 30-year ma­tu­ri­ties. The re­main­ing 12 ma­tu­ri­ties were weaker by less than one ba­sis point or un­changed.

Mu­nis were weaker on Mu­nic­i­pal Mar­ket Data’s AAA bench­mark scale, which showed yields on both the 10-year muni gen­eral obli­ga­tion and 30-year muni ris­ing by two ba­sis points.

On Tues­day, the 10-year muni-to-Trea­sury ra­tio was cal­cu­lated at 86.8% while the 30-year muni-to-Trea­sury ra­tio stood at 99.5%, ac­cord­ing to MMD.

PERK-UP AHEAD

De­mand for mu­nic­i­pals should perk up be­fore year end -- de­spite con­tin­ued ris­ing rates and ex­pec­ta­tions for 2018 end­ing with po­ten­tially neg­a­tive re­turns, ac­cord­ing to Jef­frey Lip­ton, manag­ing di­rec­tor and head of mu­nic­i­pal re­search and strat­egy and mu­nic­i­pal cap­i­tal mar­kets at Op­pen­heimer & Co.

“We do think that bonds will wit­ness a more re­cur­ring ap­peal given a host of geopo­lit­i­cal events — even as the Fed con­tin­ues to el­e­vate in­ter­est rates,” he wrote in a weekly mu­nic­i­pal re­port. ◽

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