| 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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New York to Borrow $800 Million as City Gains Favor Over State |
Bloomberg - June 9, 2010 - By Brendan A. McGrail and Allison Bennett
New York City is selling $800 million of debt today with investors growing more confident in its finances than those of the state, which has operated without a budget since April.
New York City general-obligation bonds maturing in 10 years paid investors 11 basis points more than comparable tax-exempt state debt yesterday, down from 45 basis points at the beginning of the year, according to Bloomberg Fair Market Value data. The so-called yield spread touched a low on May 20 of 6 basis points, or 0.06 percentage point.
The nation’s most-populous city will have a balanced budget this year and in 2011 because of spending cuts and a faster- than-expected economic recovery, state Comptroller Thomas P. DiNapoli said on June 3. Meanwhile, lawmakers in Albany have passed 10 weekly emergency spending bills to keep the state running while they grapple with an $8.5 billion budget gap.
“The city’s budgeting practices seem to be better respected by the market than the state’s,” said Mike Pietronico, who oversees $255 million in municipal bonds as chief executive officer of Miller Tabak Asset Management in New York. “The state’s budget situation is not being viewed as a positive development.”
Today’s sale comprises $780 million of taxable Build America Bonds and $20 million of tax-exempts, with maturities from 2012 through 2036, according to preliminary documents. Proceeds will be used to finance capital projects. It comes as yields on the city’s 10-year general-obligations fell to 3.68 percent yesterday, equaling an eight-month low on May 25.
Credit-Default Swaps
The cost of credit-default swaps, insurance contracts protecting bondholders against default, is less for New York City than for state debt, Bloomberg data show. Five years of protection against default on city bonds closed at 199.7 basis points yesterday, according to the Markit MCDX index. That means it costs $199,700 to protect $10 million of bonds for a year. For state debt, the price was $215,200.
Debt for both the city and state is rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s, each the third- highest. New York and New York City were the second- and third- largest issuers of municipal bonds in 2009, respectively, after California.
New York City sold about $561 million of Build Americas in March with the bulk maturing in 2036. The state sold about $576 million of the debt through its Urban Development Corp. in November, all due in 2039.
Investors demanded 47 basis points more yield for the city’s Build America Bonds than for the state’s urban development debt on March 19, according to Bloomberg valuation data. The spread narrowed to 38 basis points on April 12, after the state missed its April 1 budget deadline, and to 24 basis points on June 7, Bloomberg data show.
Better Shape
“The city is out-trading state-appropriated debt,” said Jim Holihan, a partner at New York-based Evercore Partners LLC, which oversees about $1 billion in municipal debt. “That’s never been the case before. It’s a factor of the city’s finances being in better shape.”
A 16 percent decline in Wall Street employment during the economic downturn was less than the 21 percent loss of the early 1990s and a similar contraction in the early 2000s, DiNapoli said in a report. The city added 53,000 jobs in the past four months, and tax collections in May exceeded the administration’s expectations by 1 percent, his report said.
City Comptroller John Liu estimated the first quarter was the second consecutive period of growth for New York’s economy after nearly two years of decline. Personal income-tax revenue grew 7.1 percent from the first quarter of 2009, he said.
Five-Year Spending
The city has made $1.3 billion of spending cuts, including the proposed closing of more than two dozen fire stations, cutting library hours and reducing support for culture and services for youth and elderly.
At the state level, Governor David Paterson’s plan to furlough 100,000 workers for one day a week to save about $30 million weekly for two months was blocked by a federal judge in May.
Lawmakers’ failure to agree on spending cuts has delayed the budget for 69 days, the most since 2004, when it was 133 days late.
Popular Security
Both the state and city’s Build America Bonds benefitted from growing popularity among investors in taxable securities, said Thomas Spalding, vice president at Nuveen Investments Inc. in Chicago, where he manages about $60 billion of municipal debt. The difference in yield between the Wells Fargo Build America Bond Index and 30-year Treasuries narrowed to 165 basis points yesterday from 174 points on Jan. 4.
“There may be some legitimacy to the conclusion that there’s more control over the fiscal situation in the city,” Spalding said. “The broader trend is that BABs in general are tightening as demand for them increases.”
Following are descriptions of pending sales of municipal debt in the U.S.:
SAN ANTONIO, the seventh most-populous U.S. city, plans to issue $244.8 million in debt as soon as next week. The offering is split into $201.9 million of Build America Bonds, $9.5 million of tax-exempts and $39.4 million of combination tax and revenue certificates of obligation. Income from the sale will go toward improvements of streets, bridges and public spaces. The city is rated AAA, the highest level, by all three rating companies. The securities will be marketed by a group led by Citigroup Inc. (Added June 9)
ILLINOIS STATE TOLL HIGHWAY AUTHORITY, responsible for a 286-mile system around the Chicago metropolitan area, plans to sell $400 million in tax-exempt bonds tomorrow to refinance existing debt. The senior bonds are being issued on parity with remaining senior bonds and will be backed by net revenues of the toll roads. Bank of America Merrill Lynch will lead underwriters in marketing the bonds to investors. The agency is rated Aa3 by Moody’s and AA- by Fitch and S&P, all the fourth-highest. (Updated June 9)
DENVER, the capital and most-populous city of Colorado, plans to offer $350 million in general obligations through a competitive sale today. The deal is made up of $312.1 million in taxable Build America Bonds maturing serially from 2017 through 2030, and $37.9 million in tax-exempts maturing from 2011 through 2016. The city, rated AAA by all three rating companies, will use the proceeds to maintain public assets under the Better Denver Program. (Updated June 9)
--With assistance from Henry Goldman in New York and Michael Quint in Albany, New York. Editors: Jerry Hart, Pete Young
To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Brendan A. McGrail in New York at bmcgrail@bloomberg.net.
To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net
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