Republican Bruce Rauner's defeat of Illinois Governor Pat Quinn in Tuesday's election is a positive for Illinois credits investors said, though it will be awhile before bondholders reap any benefits.
Rauner, a former businessman, beat Quinn 51% to 46%. Traders are hopeful about the change in leadership, with one trader in Chicago going so far as to call Quinn's governorship "a failure."
Rauner "is a step in the right direction; maybe he can succeed where Quinn failed," the trader said. "Quinn did fail. He did not get [a pension overhaul] done. Everyone knows he was not a favorite. Can you put [all the state's problems] on him? No, but a new regime will be good."
The trader said that he believes Rauner will find a solution to the pension issue, which will take pressure off the state's ratings and cause Illinois general obligation bonds as well as other credits to trade up.
He did say though there will not be any immediate impact on trading "just because a Republican governor is now in office".
The bonds' performance has been mixed Wednesday, according to data provided by Bloomberg.
The yield on 5.1s in 2033 has held steady at 5.26% from Tuesday, though its spread has tightened by two basis points. The 5s in 2033 on the other hand had its yield rise by 60 basis points to 4.10% from when it was last traded on Oct. 17, and its spread has widened out by 25 basis points.
The third most actively traded Illinois GO, a different 5.1 in 2033 cusip rose by 10 basis points in yield from Tuesday to 5.25%, and its spread tightened by two basis points.
A second trader in Chicago said there will be an impact on trading once Rauner gets into office.
"When you hear what he's going to do there will be some reaction," he said.
Both the first and the second trader predict long-term strengthening on the Illinois GO. They do not see that strengthening happening for some time though.
"It's going to be a tough battle," the second trader said. "Especially because Democrats are still in control of the state Congress."
Primary:
Bank of America Merrill Lynch priced the two-part $461.1. million sale of north Texas Tollway Authority revenue refunding bonds on Wednesday. The $313.6 million part of the deal had yields ranging from 1.83% with a 5% coupon in 2020 to 2.98% with a 5% coupon in 2025.
These bonds are rated A2 by Moody's Investors Service and A-minus by Standard & Poor's.
The second section of the deal, totaling $147.51 million, has yields from 3.58% with a 5% coupon in 2029 to 3.68% with a 5% coupon in 2031. The bonds in this part earned ratings of A3 from Moody's and BBB-plus from S&P.
Bonds from both segments have an optional par call in 2024.
The Anaheim Public Financing Authority's $254.96 million lease revenue bonds for the Anaheim Convention Center expansion project were priced with yields from 0.87% with a 5% coupon in 2016 to 4.29% with a 5% coupon in 2046.
There is a call option in 2024 and sinking funds on a 2039 and a 2046 term bond. Citigroup was the managing underwriter and the bonds earned ratings of AA-minus from S&P and Fitch.
The New York City Transitional Finance Authority's bonds entered their intuitional sale period with yields from 0.61% with a 4% coupon in 2017 to 3.47% with a 5% coupon in 2042.
The bonds can be called in 2024, had Barclays as their managing underwriter, and earned triple-A ratings from the three major rating agencies.
Scales:
The municipal market continued to sell-off on Wednesday, which traders said is good because it makes munis attractive to Treasuries and is causing them to believe money may soon flow into the municipal market.
Bonds maturing in six years yield rose by as much as one basis point, according to Municipal Market Data's triple-A scale. Bonds maturing in seven to 10 years' yield rose up to two basis points, from one to three basis points for bonds maturing in 12 to 21 years, and by as much as two basis points for the 22 to 30 year maturities.
