| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Chicago O’Hare Leads Largest Municipal Bond Sales Since March |
By Catarina Saraiva and Allison Bennett
April 16 (Bloomberg) -- States and municipalities led by Chicago’s O’Hare International Airport sold $7.2 billion of bonds this week, the most since March, as investor demand for tax-exempt debt drove down interest rates from the highest level since July.
Yields on 10-year, top-rated tax-exempt bonds, which reached a nine-month high of 3.3 percent last week, began falling three days ago and were unchanged at 3.26 percent yesterday, according to a daily survey by Concord, Massachusetts-based Municipal Market Advisors. Taxable Build America Bond yields rose to an average of 6.2 percent on April 14, the highest since April 9, according to the Wells Fargo Build America Bond Index.
“There’s a limited amount of tax-exempts out there and strong demand,” said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s private wealth management unit in New York. “Maybe people saw higher yields, or found out they were in a higher tax bracket and turned to munis.”
Chicago’s O’Hare airport, the fourth-largest by passenger traffic last year, sold $1.17 billion in tax-exempt and federally subsidized Build America bonds for a modernization project. Local governments issued $3.2 billion in taxable debt and $4 billion in tax-exempts, according to data compiled by Bloomberg.
An increase in the supply of taxable issues outpaced non- taxed obligations, narrowing the gap between them to $817.6 million, the smallest in six weeks, according to Bloomberg data. About 44 percent of the week’s issues were subject to taxes, compared with 28 percent in the week ending April 2. Tax-exempt sales slid to 56 percent of total issues from 72 percent.
Taxable Sales
Taxable sales have been driven by Build America issues, said Justin Hoogendoorn, a managing director at BMO Capital Markets in Chicago. Thirty-five percent of the interest cost is subsidized by the U.S. government, under last year’s economic stimulus legislation.
“Issuers are still seeing a benefit of issuing BABs farther out on the curve and right now they don’t want to upset the applecart,” Hoogendoorn said. “Government buyers are crossing over and corporate buyers from the low-quality side are, too.”
Long-term bond mutual funds, the largest institutional holders of municipal debt, saw a jump in cash inflows since the end of March, according to the Investment Company Institute, a Washington-based trade group. Fund investors added an estimated $352 million to municipal bonds in the week ended April 7, compared with an outflow of $117 million in the previous period, the institute said in an April 14 report.
Lower Yields
Some issuers were able to secure lower yields in the final pricing than they had estimated in preliminary forecasts.
Rensselaer Polytechnic Institute, the oldest U.S. technological university, sold $359 million in tax-exempts through New York’s Troy Capital Resource Corp. The 30-year bonds, the bulk of the issue, were priced to yield 5.24 percent, down from 5.3 percent in preliminary pricing, according to Bloomberg data.
“Munis have been following the Treasuries roller-coaster ride,” Deutsche Bank’s Pollack said. “Munis have been a little slower to come down and that has made them more attractive relative to Treasury yields.”
Ten-year municipal debt yielded about 85.3 percent of equivalent-maturity Treasuries on April 13, the highest in two months, according to Bloomberg data.
Following are descriptions of pending sales of municipal debt in the U.S.:
ILLINOIS, the second-lowest-rated state after California, will sell $700 million of federally subsidized Build America Bonds as early as next week to help fund grants for school districts as well as capital projects. The securities are general obligations, backed by the full faith and credit of the state, according to preliminary offering documents. Illinois, the fourth most-populous U.S. state, was downgraded one level by Fitch Ratings on March 29 to A-, the fourth-lowest investment grade. The state has an A+ rating from Standard & Poor’s, the fifth-highest, and an A2 from Moody’s Investors Service, one level lower. Underwriters led by William Blair & Co. will market the issue. (Updated April 16)
CHILDREN’S HOSPITAL LOS ANGELES, one of the top 10 recipients of funding from the National Institutes of Health, according to Moody’s, will sell $141 million in fixed-rate health-care revenue obligations through the California Health Facilities Financing Authority as early as next week to refinance auction-rate securities from 2004 and a portion of variable-rate debt from 2008. Citigroup Inc. will market the notes, rated Baa2 by Moody’s, two levels above high-risk, high- yield junk. (Updated April 16)
LOS ANGELES UNIFIED SCHOOL DISTRICT, the nation’s second- largest after New York, plans to sell about $450 million in bonds as early as next week to finance school construction. The voter-approved, general-obligation issue include about $160 million in tax-exempt debt and $290 million in taxable Qualified School Construction Bonds, the interest on which is subsidized by the federal government. The Los Angeles schools sold $1.75 billion of municipal securities in mid-February. The district’s debt is rated AA- by S&P and Aa3 by Moody’s, the fourth-highest grade. (Added April 16)
CONNECTICUT, the U.S. state with the highest net tax- supported debt, will sell about $642 million in general- obligation bonds and bond anticipation notes as early as next week to retire debt and finance various projects, according to preliminary offering documents. About $184 million will be issued as taxable Build America Bonds, with $105 million in tax- exempt securities. The notes will pay the state’s anticipation notes from 2009 and will mature in May 2011. The debt is rated AA+ by Fitch, the second-highest investment grade. (Added April 16)
PUERTO RICO ELECTRIC POWER AUTHORITY, the commonwealth’s monopoly power utility, plans to sell about $625 million in revenue debt as part of a five-year, $1.7 billion capital improvement plan. The issue will include $275 million in tax- exempt securities to refinance existing debt, preliminary offering documents show, and $350 million in taxable Build America Bonds, according to Fitch. The power authority, which sold $822 million in tax-exempt debt on March 26, is rated A3 by Moody’s, the fourth-lowest investment grade, and BBB+ by Fitch and S&P, one level lower. (Added April 16)
--With assistance from Brendan A. McGrail in New York. Editors: Pete Young, Walid el-Gabry
To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net.
To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net
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