Chicago is heading to market Thursday with a scaled-down version of sales tax securitization bonds, which will refund outstanding general obligation bonds.
“The Sales Tax Securitization Corp. will sell approximately $624.6 million of tax-exempt bonds tomorrow, Nov. 15,” finance department spokeswoman Kristen Cabanban confirmed in a statement late Wednesday.
The revised deal drops the 2053 maturity that had raised concerns among some city Aldermen and market participants over the more than decade extension of maturities beyond the bonds being refunded.
While the deal is trimmed down from the $1.3 billion slated for late last month, it’s close to the $665 million that Chicago initially intended to sell. The city raised the size late last month after investors showed strong interest.
Chicago finance chief Carole Brown said demand offered the city a chance to get the full $3 billion borrowing program done before Mayor Rahm Emanuel leaves office in May as he is not seeking a third term.
The deal was set to price on Halloween, but bookrunner Loop Capital Markets moved the deal to the day-to-day calendar citing market conditions. The city faced rocky market conditions, rising rates, and heavier demand that week for short-term paper.
Loop and Stifel as lead managers are set to price the $623.225 million of Series 2018C sales tax securitization bonds.
RBC Capital Markets, The Williams Capital Group, Mesirow Financial and Academy Securities are co-managers.
Columbia Capital Municipal Advisors and PFM are financial advisors.
The bonds are issued through a bankruptcy-remote special purpose entity that insulates the debt from city operations carry AAA marks from Fitch Ratings and Kroll Bond Rating Agency and AA-minus from S&P Global Ratings.
Bank of America Merrill Lynch priced the New Jersey Economic Development Authority’s $430.51 million of Series 2018 EEE and Series 2018 FFF school facilities construction bonds.
The deal is rated Baa1 by Moody’s Investors Service, BBB-plus by S&P and A-minus by Fitch.
BAML also priced the Central Florida Expressway Authority’s $221.86 million of Series 2018 senior lien revenue bonds.
The deal is rated A1 by Moody’s and A-plus by S&P and Fitch.
RBC Capital Markets priced the Los Angeles Department of Water and Power’s $426.43 million of Series 2018B water system revenue bonds.
The deal is rated Aa2 by Moody’s, AA-plus by S&P and AA by Fitch Ratings.
In the competitive arena, the Wentzville R-IV School District, Mo., sold $159.82 million of Series 2018 general obligation refunding and improvement bonds under the Missouri Direct Deposit program.
Morgan Stanley won the bonds with a true interest cost of 3.5508%.
Proceeds will be used to finance various school improvements and to current refund some outstanding debt. The financial advisor is Stifel while the bond counsel is Thompson Coburn.
The deal is rated Aa1 by Moody’s and AA-plus by S&P.
Bond sale results
New Jersey
California
Bond Buyer 30-day visible supply at $5.83B
The Bond Buyer's 30-day visible supply calendar decreased $3.01 billion to $5.83 billion for Thursday. The total is comprised of $1.71 billion of competitive sales and $4.11 billion of negotiated deals.
ICI: Long-term muni funds saw $909M outflow
Long-term tax-exempt municipal bond funds saw an outflow of $909 million in the week ended Nov. 7, the Investment Company Institute reported Wednesday.
This followed an outflow of $1.196 billion in the week ended Oct. 31 and outflows of $179 million, $1.310 billion, $1.653 billion, $3 million and $374 million in the previous five weeks.
Taxable bond funds saw an estimated inflow of $1.686 billion in the latest reporting week, after seeing an outflow of $17.404 billion in the previous week.
ICI said the total estimated outflows to long-term mutual funds and exchange-traded funds were $2.436 billion after outflows of $16.353 billion in the prior week.
Secondary market
Municipal bonds were stronger on Thursday, according to a midday read of the MBIS benchmark scale. Benchmark muni yields fell as much as one basis point in the one- to 30-year maturities.
High-grade munis were also stronger, with yields calculated on MBIS' AAA scale decreasing as much as one basis point across the curve.
Municipals were stronger on Municipal Market Data’s AAA benchmark scale, which showed the yield on the 10-year muni general obligation falling as much as two basis points and the yield on 30-year muni maturity dropping one to three basis points.
Treasury bonds were stronger as stocks traded lower. The Treasury 10-year stood at 3.097% while the Treasury three-month bill was at 2.371%.
On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 86.5% while the 30-year muni-to-Treasury ratio stood at 100.9%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.
Previous session's activity
The Municipal Securities Rulemaking Board reported 46,601 trades on Wednesday on volume of $12.58 billion.
New York, California and Texas were the municipalities with the most trades, with the Empire State taking 15.941% of the market, the Golden State taking 15.911% and the Lone Star State taking 9.914%.
Muni money market funds see inflows
Tax-free municipal money market fund assets increased $138.5 million, raising their total net assets to $135.41 billion in the week ended Nov. 12, according to the Money Fund Report, a service of iMoneyNet.com.
The average seven-day simple yield for the 196 tax-free and municipal money-market funds inched up to 1.18% from 1.17% last week.
Taxable money-fund assets decreased $2.56 billion in the week ended Nov. 13, lowering total net assets to $2.736 trillion.
The average, seven-day simple yield for the 826 taxable reporting funds nudged up to 1.83% from 1.82% last week.
Overall, the combined total net assets of the 1,022 reporting money funds fell $2.42 billion to $2.872 trillion in the week ended Nov. 13.
Treasury announces auction details
The Treasury Department announced these auctions:
- $11 billion of 9-year 8-month 3/4% TIPs selling on Nov. 21;
- $36 billion of 181-day bills selling on Nov. 19; and
- $42 billion of 90-day bills selling on Nov. 19.
Gary Siegel 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.
