Muni market looks at tobacco deal, Trump's infrastructure plans

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The municipal bond market on Wednesday was taking stock of Pennsylvania’s successful sale of over $1.5 billion of tobacco bonds.

Jefferies priced the Commonwealth Financing Authority’s $1.52 billion of Series 2018 tobacco master settlement payment revenue bonds on Tuesday and was able to lower yields and raise amounts due to overwhelming investor demand.

The tobacco deal is rated A1 by Moody’s Investors Service A by S&P Global Ratings and A-plus by Fitch Ratings except for the $427.54 million 2039 maturity which is insured by Assured Guaranty Municipal and rated AA by S&P.

Bond Buyer 30-day visible supply at $5.44B
The Bond Buyer's 30-day visible supply calendar decreased $219.6 million to $5.44 billion on Wednesday. The total is comprised of $2.43 billion of competitive sales and $3.01 billion of negotiated deals.

Janney: Infrastructure plan prioritizes financing
President Trump’s newly released his infrastructure plan prioritizes financing over funding, according to a report released by Janney on Tuesday.

“The main tenets of the plan include generating at least $1.5 trillion over the next decade for infrastructure, investing in rural infrastructure projects, streamlining the regulatory review process, and expanding job-training opportunities,” Erin Ortiz, managing director of municipal research at Janney. “The proposal offers $20 billion annually for 10 years, which will require significant investment from states and local governments, as well as cooperation from the private sector.”

Allocation of $200 billion is expected to spur the $1.5 trillion of infrastructure investment over the next decade. There are five main components of the plan: the incentives program; rural infrastructure grants; the transformative projects program; the infrastructure financing program; and a capital revolving fund.
The incentives program gives half of its $200 billion allocation to states and localities. Eligible projects include surface transportation and airports, passenger rail, ports and waterways, flood control, water supply, hydropower, water resources, drinking water facilities, wastewater facilities, storm water facilities, and Brownfield and Superfund sites.

The second largest allocation of $50 billion will go to rural infrastructure projects and will prioritize investment in freight movement, transportation options, and health and safety of residents and businesses. Projects can include transportation, broadband, water and waste, power and electric, and water resources.

The transformative projects would get $20 billion for “ambitious, exploratory, and ground-breaking” projects to benefit transportation, clean water, drinking water, energy, commercial space, and broadband.

The infrastructure financing program would receive $20 billion to increase the existing federal credit programs, including the Transportation Infrastructure Finance and Innovation Act; Railroad Rehabilitation and Improvement Financing; Water Infrastructure Finance and Innovation Act. It also recommends expanding the use of private activity bonds, which were on the chopping block during the tax reform negotiations just last year. The plan dedicates $6 billion to encourage increased private investment to benefit from tax-exempt bonds by broadening the categories and eliminating the volume cap.

The remaining $10 billion would go into a capital revolving fund, which would fund large real property purchases.

“Given the importance of infrastructure to the nation’s economic health and safety, and a consensus around the persistent underinvestment, there is broad, bipartisan support for an infrastructure bill,” Ortiz said. “As with prior administrations that proposed infrastructure bills, lack of consensus around how to fund the plan and its cost remain key obstacles.”

Previous session's activity
The Municipal Securities Rulemaking Board reported 44,556 trades on Tuesday on volume of $11.13 billion. California, Texas and New York were the three states with the most trades, with the Empire State taking 13.057% of the market, the Golden State taking 12.639% and the Lone Star State taking 10.678%.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Vanessa Kim at 212-803-8474 for more information.

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