The Sales Tax Securitization Corp.’s highly anticipated bond sale has been delayed until next week at the earliest, Chicago officials said on Wednesday.
“We did see the bond market strengthen a bit today, but as you know, it’s been off to a bit of a weak start in 2018,” said city Finance Department spokeswoman Molly Poppe. “We decided to postpone until as early as next week and during that time we will evaluate alternative structures.”
Goldman Sachs had been set to price the Sales Tax Securitization Corp.’s $898.07 million of Series 2018A sales tax securitization bonds on Wednesday. Other members of the group include Cabrera Capital Markets, Janney, Blaylock Van, Estrada Hinojosa and Siebert Cisneros Shank & Co.
The deal is rated AA by S&P Global Ratings, and AAA by Fitch Ratings and Kroll Bond Rating Agency.
Buyers have expressed interest in the deal, which boasts high ratings along with expectations for high yields.
Primary market
JPMorgan Securities priced the Orlando Utilities Commission, Fla.’s $150.18 million of Series 2018A utility system revenue bonds.
The issue was priced as 5s to yield from 1.73% in 2023 to 2.78% in 2038. The deal is rated Aa2 by Moody’s and AA by S&P and Fitch.
In the competitive arena on Wednesday, the University of Kentucky sold $210.56 million of Series 2018A general receipt bonds.
Wells Fargo Securities won the bonds with a true interest cost of 3.31%.
The issue was priced to yield from 2.07% with a 5% coupon in 2025 to 3.11% with a 4% coupon in 2039. A 2041 maturity was priced as 3 1/4s to yield approximately 3.436%, a 2042 maturity was priced as 3 3/8s to yield approximately 3.497% and a 2047 maturity was priced as 3 1/2s to yield approximately 3.569%. The deal is rated Aa2 by Moody’s and AA by S&P.
Since 2009 the university has sold about $1.17 billion of bonds, with the most issuance occurring in 2014 when it sold $327 million. UK did not come to market in 2011 and 2013.
In the short-term competitive arena, the New York Metropolitan Transportation Authority sold $500 million of Series 2018A transportation revenue bond anticipation notes, due Aug. 15, 2019, to five groups.
Citigroup won $200 million, taking $100 million with a bid of 4% and a $3,609,000 premium, an effective rate of 1.651290% and took $100 million with a bid of 4% and a $3,584,000 premium, an effective rate of 1.667220%.
Jefferies won $100 million with a bid of 4% and a premium of $3,590,002, an effective rate of 1.663400%.
Morgan Stanley won $100 million, taking $50 million with a bid of 4% and a premium of $1,789,500, an effective rate of 1.670410% and took $50 million with a bid of 4% and a premium of 1,788,000, an effective rate of 1.672320%.
JPMorgan won $75 million, taking $50 million with a bid of 4% and a premium of $1,793,000, an effective rate of 1.665950% and taking $25 million with a bid of 4% and a $892,750 premium, an effective rate of 1.675510%.
Goldman Sachs won $25 million with a bid of 4% and a premium of $901,500, an effective rate of 1.653200%.
The BANs are rated MIG1 by Moody’s, SP1-plus by S&P, F1-plus by Fitch and K1-plus by Kroll.
Secondary market
The MBIS municipal non-callable 5% GO benchmark scale was mixed in late trading.
The 10-year muni benchmark yield fell to 2.335% on Wednesday from the final read of 2.369% on Tuesday, according to
The MBIS benchmark index is updated hourly on the
Top-rated municipal bonds finished unchanged on Wednesday. The yield on the 10-year benchmark muni general obligation was steady from 2.10% on Tuesday, while the 30-year GO yield was flat from 2.69%, according to the final read of MMD’s triple-A scale.
U.S. Treasuries were weaker in late activity. The yield on the two-year Treasury rose to 2.05% on Wednesday from 2.01% on Tuesday, the 10-year Treasury yield gained to 2.58% from 2.55% and the yield on the 30-year Treasury increased to 2.85% from 2.84%.
On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 78.0% compared with 82.6% on Tuesday, while the 30-year muni-to-Treasury ratio stood at 92.6% versus 94.9%, according to MMD.
MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 41,213 trades on Tuesday on volume of $9.74 billion.
UBS see positive returns for tax-exempts
Tax-exempts will post a positive return in 2018 for three reasons, according to a report released on Wednesday by UBS.
“First, we anticipate limited supply, representing an important tailwind for munis. We now forecast overall supply for calendar year 2018 to total about $330 billion – $340 billion in the wake of tax reform,” UBS said in its Municipal Market Guide.
In 2017 before the tax reform legislation was passed, UBS forecast overall new issue volume to total between $350 billion and $360 billion, in the absence of tax reform. UBS said it lowered its supply forecast since advance refundings are no longer eligible for tax-exempt financings under the new law.
“Second, U.S. Treasury yields should remain range bound. [The UBS Chief Investment Office] forecasts a 10-year Treasury yield between 2.5% and 2.7% at the end of the year,” the firm said.
“And, third, we believe that demand for tax-free munis will remain positive based on a scarcity of alternative tax shelters,” UBS said. “By contrast, rising inflation expectations and the potential for a sudden spike in U.S. interest rates are two principal risks to our outlook.”
--Yvette Shields contributed to this report.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation.
