Market participants will be awaiting larger deals from issuers in Hawaii and Texas on Wednesday as well as a possibility the market could finally see the $875 million of general obligation bonds from Chicago Board of Education, as CPS Chief Executive Officer Forrest Claypool said on Tuesday at a press conference that the deal will price Wednesday.
Munis were slightly stronger on Wednesday morning, as yields on some maturities were as many as two basis points lower, according to traders.
Secondary Market
The yield on the 10-year benchmark muni general obligation was as many as two basis points lower from 1.68% on Tuesday, while the 30-year muni yield was steady at 2.72%, according to a morning read of Municipal Market Data's triple-A scale.
Treasuries were slightly weaker on Wednesday morning. The yield on the two-year Treasury was flat from 0.75% on Tuesday, while the 10-year Treasury yield increased to 1.88% from 1.86% and the 30-year Treasury bond yield was up to 2.68% from 2.67%.
The 10-year muni to Treasury ratio was calculated on Tuesday at 90.3% compared to 87.7% on Monday, while the 30-year muni to Treasury ratio stood at 101.7% versus 99.2%, according to MMD.
Primary Market
Last week the Chicago Public Schools postponed its $875 million general obligation bond deal. Chicago Board of Education officials placed the offering on the day-to-day negotiated calendar. But CPS Chief Executive Officer Forrest Claypool said last Thursday the board expects to bring the sale to market early this week and on Tuesday afternoon he said the deal will price on Wednesday. He also announced $100 million in cuts that will be decided by principals and will put an end to district's coverage of 7% of the teachers' 9 % pension payment, central to CPS' budget plans. The announcement follows the Chicago Teachers Union's rejection of a four-year contract offer.
In another development Tuesday, Gov. Bruce Rauner escalated his threats to attempt a state takeover of the district, which Democrats have rejected.
Bookrunner JPMorgan had not released a pricing schedule, structure, or pre-marketing wire by late Tuesday. Several market participants said they would have expected to see one if the sale was being readied for Wednesday.
Brian Battle, director of trading at Performance Trust Capital Partners said the lack of any deal information, especially since the finance team said they were looking at structural and term changes to accommodate potential investors, suggests that CPS and its underwriting team have put together a sufficient order book. He stressed little about the deal is usual.
"They must be pretty confident," he said of the potential orders. "Everything about this deal is unusual. For the municipal market given the size of the junk-rated sale, the negative headlines over the teachers' contract, downgrades, the takeover threat, and cash flow crisis."
Elsewhere on Wednesday, Bank of America Merrill Lynch is set to price the Hawaii County's $235 million of Series 2016 A, B, C, D E, and F taxable general obligation bonds. The deal is rated Aa2 by Moody's.
Raymond James is also set to price Lamar Consolidated Independent School District, Texas's $141.105 million of unlimited tax refunding bonds. The deal is backed by the Permanent School Fund Guarantee Program and is rated triple-A by both Moody's and S&P.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 38,996 trades on Tuesday on volume of $7.604 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $231.7 million to $10.00 billion on Wednesday. The total is comprised of $3.75 billion of competitive sales and $6.25 billion of negotiated deals.
Yvette Shields contributed to this report
