| 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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Build America Sales May Rise 40%, JPMorgan Chase Says |
By Jeremy R. Cooke
Dec. 1 (Bloomberg) -- New issues of Build America Bonds, the type of subsidized taxable debt Massachusetts will offer today, may rise 40 percent from this year’s monthly average to total $110 billion in 2010, JPMorgan Chase & Co. said.
Build America sales, which have exceeded $55 billion since they began in April, are poised to finish the year at about $59 billion for a $6.56 billion monthly average, according to a Nov. 27 report from the New York-based bank. Massachusetts, the U.S. state with the second highest tax-supported debt per capita, wants to issue $500 million of 30-year Build America Bonds to fund public works.
The stimulus initiative, under which the U.S. Treasury pays 35 percent of the interest for states and municipalities, may produce $9.17 billion a month in deals next year, JPMorgan estimates, as more issuers seek lower net borrowing costs than on traditional tax-exempt financing. The increase would help to buoy the value of bonds in the broader municipal market.
“The motivation to issue BABs instead of tax-exempt debt is clear and simple: to save money,” Chris Holmes and Alex Roever, JPMorgan fixed-income strategists, said in the report.
The BofA Merrill Lynch Municipal Master Index, which accounts for price swings and interest income, rose 13.7 percent this year through Nov. 27, its best performance for that period since 1995. During the same period, the Treasury Master Index fell 1.2 percent. The BofA Merrill Lynch Build America Bond Index has returned 6.1 percent since its April 30 inception.
General Obligation Bonds
Municipal Market Advisors’ daily survey of yields on benchmark 10-year general obligation bonds held steady at a seven-week low of 3.04 percent yesterday. The index, compiled by the Concord, Massachusetts-based independent research firm, began the year at 3.91 percent.
Yields on lower-rated Build America Bonds may rise as much as 30 basis points, or 0.3 percentage point, relative to comparably rated corporate debt if governments recover more slowly from the recession than companies do and corporate debt issuance falls in 2010, according to the JPMorgan report.
Build America issues with BBB ratings were yielding on average at least 100 basis points more than similar company bonds as of Nov. 20, while the spread, or yield difference, was less than 20 basis points for AAA securities, JPMorgan said. Taxable municipal bonds with AA grades had yields similar to corporates in that category, the latest average shows.
The authorization to sell Build America Bonds, included in February’s American Recovery and Reinvestment Act, currently expires at the end of 2010, which may prompt a flurry of last- minute issuance next fourth quarter. Investors are speculating Congress may extend the program and reduce the level of subsidy on new issues from 35 percent, JPMorgan said.
Underwriting Banks
Investment banks led by Goldman Sachs Group Inc. and Barclays Plc are handling the Massachusetts offering, the third group of Build America Bonds to be sold by the state after public-university and mass-transit deals in October.
Massachusetts’s general obligation pledge is rated AA by Standard & Poor’s and Fitch Ratings and an equivalent Aa2 by Moody’s Investors Service.
Massachusetts Bay Transportation Authority 5.569 percent taxable bonds due in July 2039 traded yesterday at a price to yield 5.435 percent, or about 123 basis points more than the benchmark 30-year Treasury bond. The bonds, backed by state sales tax revenue and rated AAA by S&P and Aa2 by Moody’s, were issued at a spread of 140 basis points.
Following are descriptions of pending sales of municipal bonds; the timing and amounts may change.
VIRGINIA COLLEGE BUILDING AUTHORITY intends to take interest-cost bids tomorrow from investment banks seeking to underwrite as much as $447 million of bonds to finance capital projects at public institutions of higher education in the state. As much as $390 million of the deal ranging in maturity from 2015 through 2030 may be bid as Build America Bonds. The debt, payable from state appropriations, is rated Aa1 by Moody’s and AA+ by Fitch and S&P. (Added Dec. 1)
ORLANDO REGIONAL HEALTHCARE SYSTEM, a hospital group with almost 1,700 beds in Orange, Seminole and Osceola counties in central Florida, plans to sell $244 million of fixed-rate bonds through the Orange County Health Facilities Authority and banks led by Goldman Sachs. The transaction, set to be priced this week with maturities ranging from 2010 through 2020, will refinance fixed- and variable-rate debt and cover termination costs for interest-rate swap contracts. Moody’s rates Orlando Health A2. Fitch and S&P rate the borrower A. (Added Dec. 1)
UNIVERSITY OF CALIFORNIA this week plans to sell as much as $539 million of Build America Bonds backed by gross revenue from its five medical centers, which totaled $5.6 billion last fiscal year, according to Moody’s. The deal will fund expansion and renovation projects at the medical centers for UC San Diego, UC Irvine, UC San Francisco and UC Los Angeles. The fifth center, associated with UC Davis, is in Sacramento. Goldman Sachs will handle the deal. The bonds are rated Aa2 by Moody’s and AA- by S&P. (Updated Dec. 1)
TENNESSEE intends to offer $290 million of general obligation bonds this week through a group of banks led by Barclays. About $54 million of the deal will consist of taxable bonds, and the rest will be tax-exempts. The proceeds will repay commercial paper, refinance long-term debt and fund new capital projects. Tennessee had the fourth-lowest net tax-supported debt burden per capita last year, according to Moody’s. The state is rated AA+ by Fitch and S&P and a comparable Aa1 by Moody’s. (Updated Dec. 1)
SAN BERNARDINO COUNTY, CALIFORNIA, the largest county by land area in the contiguous U.S., plans to sell $286.1 million of fixed-rate debt securities this week through Bank of America Corp.’s Merrill Lynch & Co. The deal will refinance variable- rate debt associated with Arrowhead Regional Medical Center, the county hospital. A bank backstop agreement that supported $174.4 million of the medical center’s debt was terminated because of a cut in MBIA Insurance Corp.’s credit rating, Moody’s said. San Bernardino’s certificates of participation are rated A3 by Moody’s. (Updated Dec. 1)
CHICAGO BOARD OF EDUCATION, overseer of the third-largest U.S. public school system, plans to sell $254.2 million of taxable Qualified School Construction Bonds this week through Goldman Sachs. Investors will be compensated with federal tax credits under the stimulus program designed to provide zero- or low-interest construction loans to public schools. The bonds may pay supplemental interest payments in addition to the tax credits. The bonds are rated A+ by Fitch and A1 by Moody’s. (Added Nov. 27)
PENNSYLVANIA TURNPIKE COMMISSION, operator of the state’s toll-road system, plans to sell about $584 million of tax- exempt bonds as soon as this year through Morgan Stanley to replace variable-rate debt and make termination payments on associated interest-rate swaps. The bonds, backed by a senior lien on revenue from the Pennsylvania Turnpike, are rated A+ by Fitch and S&P. Some of the debt will be fixed-rate. Payouts on the rest will be based on the Securities Industry and Financial Markets Association muni variable-rate index. (Updated Nov. 25)
To contact the reporter on this story: Jeremy R. Cooke in New York at jcooke8@bloomberg.net.
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