| 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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| 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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Munis in Worst Month Since ‘08 as California, Alabama to Borrow |
By Jeremy R. Cooke
Oct. 21 (Bloomberg) -- Municipal bonds headed for their worst monthly performance in a year, as state agencies from California and Alabama plan to tap the debt markets for more than $750 million apiece.
California’s Public Works Board plans to offer $820 million of revenue bonds backed by lease payments on state facilities today and tomorrow, and Alabama’s Public School and College Authority intends to sell almost $776 million of fixed-rate debt payable from utility and sales taxes as soon as today.
State and local government bonds have dropped almost 2 percent since Sept. 30, based on Merrill Lynch & Co.’s Municipal Master Index, which lost a record 5.1 percent in September 2008. At least four states -- Washington, Hawaii, Maryland and Minnesota -- have postponed or scaled back refinancing plans this month as benchmark borrowing costs rose the most since January as measured by the weekly Bond Buyer 20 index.
The delayed deals “could become a barrier to a near-term market rebound, since they remain an overhang in a market that has struggled recently to handle new issue supply without a significant yield correction,” George Friedlander, municipal strategist at Morgan Stanley Smith Barney in New York, said in an Oct. 16 report.
Municipal issuers want to sell $17.7 billion in fixed-rate bonds during the next 30 days, 45 percent more than the 12-month average, according to an index compiled from planned offerings on Bloomberg calendars.
Unchanged Yields
Yields on AAA general obligation bonds due in 10 years were unchanged at 3.21 percent yesterday after reaching a three-month high of 3.22 percent last week, according to a daily survey by Municipal Market Advisors of Concord, Massachusetts.
Underwriters led by Morgan Stanley and Royal Bank of Canada’s RBC Capital Markets unit are marketing the California deal. Individual investors asked for $67.5 million, or almost 26 percent, of the $263.2 million in securities that were offered to them yesterday during a dedicated retail order period, according to an e-mail yesterday from California State Treasurer Bill Lockyer’s office.
When retail buyers got a chance to buy the state’s tax- exempt general obligation bonds on Oct. 6, they ordered $360.8 million, or almost 28 percent, of the $1.3 billion offered. State finance officials and their underwriters ended up increasing payouts on the bonds before final pricing.
Estimated yields on the Public Works Board deal ranged from 1.47 percent on one-year notes to 5.5 percent on 20-year bonds.
Build America Bonds
Institutions such as mutual funds and insurance companies can buy the tax-exempt bonds today, said Tom Dresslar, a spokesman for State Treasurer Bill Lockyer. Out of the $820 million total, about $500 million will be federally subsidized, taxable Build America Bonds, which will be sold tomorrow, Dresslar said.
The California board is borrowing to finance a new complex for a division of the California Natural Resources Agency and improvements to prisons, state office buildings, veterans’ homes and hospitals for people with mental disabilities.
Fitch Ratings grades the bonds BBB-, one level above high- risk, high-yield junk status. Moody’s rates them one level higher at Baa2. S&P assigns its A- rating, the fourth-lowest investment grade.
The Alabama authority also chose Morgan Stanley to handle its deal this week. The bonds are rated Aa2 by Moody’s and AA by S&P and Fitch. All except $38.1 million will be used to refinance previous capital-improvement issues associated with derivatives agreements dating from 2002 that the agency is challenging in court, with a trial date set for next year. The rest will finance new construction loans to local school boards.
Maryland Changes
Maryland delayed plans to refinance debt by selling $603.4 million of its top-rated general obligation bonds after rising yields erased projected savings. The state will proceed with a $200 million borrowing for new facilities projects, offered today via competitive bidding among investment banks.
Underwriters may choose to bid $58.2 million of the debt due from 2022 through 2024 as Build America Bonds or tax-exempt debt. The state will choose the more advantageous option after accounting for the 35 percent federal interest subsidy on the taxable bonds.
Following are descriptions of some pending sales of municipal bonds; the timing and amounts may change.
CATHOLIC HEALTH INITIATIVES plans to sell about $1.1 billion of tax-exempt bonds this week in deals arranged by state agencies in Colorado and Kentucky and by Ohio’s Montgomery County. The money raised will be used to pay off variable- and auction-rate debt as well as reimburse the system for previous capital spending and fund new projects. Morgan Stanley will lead banks marketing the bonds, which are rated AA by Fitch Ratings and Standard & Poor’s, and Aa2 by Moody’s Investors Service. The Denver-based health-care system operates 78 hospitals in 20 states and has annual revenue of $8.2 billion, according to its Web site. (Updated Oct. 21)
MINNESOTA is negotiating the sale of about $535 million of general obligation bonds through a group of underwriters led by Barclays Plc. Individual investors can place orders today. Institutions such as funds and insurers will be able to buy tomorrow, when final prices and rates are set. The proceeds will refinance debt and fund about $470 million in projects for parks, education, pollution control, transportation, natural resources and agriculture. The state’s full faith, credit and taxing power pledge carries S&P and Fitch’s top rating of AAA and Moody’s second-highest grade, Aa1. (Updated Oct. 21)
PENNSYLVANIA TURNPIKE COMMISSION, operator of the state’s toll roads, plans to issue $524 million of revenue bonds through Goldman Sachs Group Inc. this week. The commission is financing a payment, set by a 2007 law called Act 44, to the Pennsylvania Department of Transportation for capital projects. The debt, secured by a subordinate lien on turnpike revenue, is rated A2 by Moody’s and A- by S&P. (Added Oct. 19)
SOUTH CAROLINA’S SANTEE COOPER, the largest producer of electricity in the state, plans to sell almost $420 million of debt this week through Goldman Sachs Group Inc. Taxable bonds will make up $100 million of the deal; the rest will be tax- exempt. The state-owned electric and water utility will use the money raised to cover costs related to the expansion of the Summer nuclear power plant and refinance debt issued a decade ago. The Moncks Corner-based agency is known officially as the South Carolina Public Service Authority. (Added Oct. 20)
COOK COUNTY, ILLINOIS, second only to Los Angeles County in population in the U.S., intends to offer as much as $400 million of its general obligation bonds as soon as today through Loop Capital Markets. The deal will include replacement of as much as $300 million of higher-cost debt. Bonds issued by Cook County, home to Chicago and 41 percent of the Illinois population, are rated AA by S&P, AA- by Fitch and Aa3 by Moody’s. The county boosted its sales tax 1 percentage point last year, raising the total in Chicago to 10.25 percent, the highest in the U.S., according to Moody’s. (Updated Oct. 21)
MOUNT SINAI SCHOOL OF MEDICINE OF NEW YORK UNIVERSITY wants to borrow almost $370 million today by selling tax-exempt revenue bonds through New York state’s Dormitory Authority. JPMorgan Chase & Co. is leading underwriters on the deal, which will fund construction of the Center for Science and Medicine at the school in East Harlem. The bonds are rated A- by S&P and A3 by Moody’s. (Updated Oct. 19)
NEW YORK’S UNITED NATIONS DEVELOPMENT CORP., which oversees office and retail leases in three UN Plaza towers in Manhattan, will offer $113.6 million of tax-exempt bonds through JPMorgan as soon as today to refinance debt. The bonds will be repaid from rents paid by tenants connected with the world body, including the United Nations Children’s Fund and missions to the UN. Fitch rates the bonds A+ and Moody’s rates them a comparable A1. (Updated Oct. 21)
CALIFORNIA’S BAY AREA TOLL AUTHORITY, the agency financing a new bridge across San Francisco Bay, intends to offer $1.3 billion of federally subsidized, taxable Build America Bonds to fund construction. The authority plans to offer the securities to investors through underwriting firms led by Citigroup Inc. and Merrill Lynch during the week of Oct. 26, Chief Financial Officer Brian Mayhew said. (Added Oct. 14)
NEW YORK CITY MUNICIPAL WATER FINANCE AUTHORITY plans to sell $500 million of Build America Bonds and $200 million of tax-exempt securities next week. A group of underwriters led by Barclays Plc will take orders from individual investors beginning Oct. 23 for the tax-exempt bonds, with final pricing for the entire offering set for Oct. 27. The fixed-rate bonds, secured by a secondary lien on gross revenue of the city’s water and utility system, carry ratings of AA+ from S&P, AA from Fitch and Aa3 from Moody’s. (Added Oct. 21)
LOUISIANA, whose credit ratings were boosted this month, plans to sell as much as $225 million of general obligation bonds through competitive bidding among underwriters Oct. 27. The state wants to raise about $200 million for capital projects and use the rest to refinance higher-interest borrowings. S&P and Fitch lifted Louisiana’s rating to AA- after the state shored up its finances following Hurricanes Katrina and Rita in 2005. Moody’s raised its outlook on the state’s A1 rating to positive from negative. (Added Oct. 15)
To contact the reporter on this story: Jeremy R. Cooke in New York at jcooke8@bloomberg.net.
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