Mu­nis Strengthen as New Is­sues Flow In on Elec­tion Day

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

Mu­nic­i­pals turned stronger on Mon­day as some new is­sue sup­ply hit the pri­mary mar­ket. Ac­tiv­ity is be­ing tem­pered by this week’s elec­tion fo­cus, ac­cord­ing to mu­nic­i­pal sources.

“The pri­mary mar­ket is poised to hit the pause but­ton this week with gross muni new is­sue sup­ply at $4.4 bil­lion due to tail risk of a bear steep­en­ing event should this week’s midterm elec­tions re­sult in a Repub­li­can House vs Demo­crat House as is ex­pected,” Peter Block, man­ag­ing di­rec­tor of credit re­search at Ramirez & Co. wrote in a re­port on Tues­day.

Oth­ers agreed the mar­ket is re­act­ing to sea­sonal cir­cum­stances and will see some im­pact from the elec­tions.

“Tax-ex­empt re­turns are lack­lus­ter on a year-to-date ba­sis,” Stephen Win­ter­stein, man­ag­ing di­rec­tor at Wilm­ing­ton Trust wrote in a re­port on Tues­day. “Mu­tual fund out­flows were less pro­nounced in Wed­nes­day’s re­port, likely re­flect­ing prior the two weeks’ mod­er­ately pos­i­tive mar­ket re­turns.

“The new is­sue slate is re­mark­ably light for the up­com­ing week and should serve as an ef­fec­tive sup­port mech­a­nism ab­sent an out­sized surge in the bench­mark U.S. Trea­sury curve,” he said. “Next week, we ex­pect to re­port on any fall­out from mid-term elec­tions and po­ten­tial ef­fects on in­fra­struc­ture and the tax-ex­empt mu­nic­i­pal bond mar­ket.”

The Vir­ginia Col­lege Build­ing Author­ity com­pet­i­tively sold al­most $215 mil­lion of ed­u­ca­tional fa­cil­ity rev­enue bonds and tax­able bonds in two sales on Tues­day.

Pub­lic Re­sources Ad­vi­sory Group was the fi­nan­cial ad­vi­sor while Ku­tak Rock was the bond coun­sel.

Cit­i­group won the $137.795 mil­lion of Se­ries 2018A tax-ex­empts for the pub­lic higher ed­u­ca­tion fi­nanc­ing pro­gram with a true in­ter­est cost of 3.4974%. JPMor­gan Se­cu­ri­ties won the $77.15 mil­lion of Se­ries 2018B tax­ables with a TIC of 4.4209%.

Pro­ceeds from both sales will be used to ac­quire in­sti­tu­tional notes to pro­vide fund­ing for cap­i­tal projects at pub­lic higher ed­u­ca­tional in­sti­tu­tions.

The deals are rated Aa1 by Moody’s In­vestors Ser­vice and AA-plus by S&P Global Rat­ings and Fitch Rat­ings.

Since 2008, the author­ity has sold roughly $9.08 bil­lion of se­cu­ri­ties, with the most is­suance oc­cur­ring in 2009 when it is­sued $1.69 bil­lion. The VCBA saw a low year of is­suance in 2008, when it sold $144 mil­lion.

RBC Cap­i­tal Mar­kets priced Ta­coma, Wash.’s $101.71 mil­lion of sewer rev­enue bonds.

The deal is rated Aa2 by Moody’s and AA-plus by S&P and Fitch.

Citi priced the Stock­ton Pub­lic Fi­nanc­ing Author­ity’s $144.825 mil­lion of Se­ries 2018A wa­ter rev­enue re­fund­ing green bonds.

The deal is rated A-mi­nus by S&P and BBB-plus by Fitch ex­cept for the 20202037 ma­tu­ri­ties which are in­sured by Build Amer­ica Mu­tual and rated AA by S&P.

Gold­man Sachs is slated to price the Cen­tral Plains En­ergy Pro­ject’s $527 mil­lion of gas pro­ject rev­enue bonds, in­clud­ing fixed rate, LIBOR in­dex rate and SIFMA in­dex rate bonds. The deal, com­ing out of Ne­braska, is rated A3 by Moody’s and A by S&P.

Piper Jaf­fray is ex­pected to price Port­land Com­mu­nity Col­lege, Ore.’s $172 mil­lion of full faith credit pen­sion tax­able bonds on Tues­day. The deal is rated Aa1 by Moody’s and AA-plus by S&P.

Mu­nic­i­pal bonds were mostly stronger on Tues­day, ac­cord­ing to a late read of the MBIS bench­mark scale. Bench­mark muni yields fell as much as one ba­sis point in the one- to 12-year and 20- to 28-year ma­tu­ri­ties, rose less than a ba­sis point in the 13- to 18-year ma­tu­ri­ties and were un­changed in the 19- and 29- and 30-year ma­tu­ri­ties.

High-grade mu­nis were mostly stronger, with yields cal­cu­lated on MBIS’ AAA scale fall­ing as much as one ba­sis point in the five- to 13-year and 19- to 27-year ma­tu­ri­ties, ris­ing less than a ba­sis point in the one- to four-year, 14- to 17-year and 29- and 30-year ma­tu­ri­ties and re­main­ing un­changed in the 18- and 28-year ma­tu­ri­ties.

Mu­nic­i­pals were mixed on Mu­nic­i­pal Mar­ket Data’s AAA bench­mark scale, which showed the yield on the 10-year muni general obli­ga­tion re­main­ing un­changed while the yield on 30-year muni ma­tu­rity rose two ba­sis points.

Trea­sury bonds were mixed as stocks traded higher. ◽

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