Issuers from New York and Texas brought the only noteworthy deals hitting screens Tuesday. Market participants will be awaiting other larger deals from issuers in Hawaii and Texas on Wednesday and there is a chance that 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 on Wednesday.
Munis closed out Tuesday stronger, as yields on some maturities were up to four basis points lower, according to traders.
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 he reiterated that on Tuesday afternoon, saying that 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.
The muni market will be on pins and needles waiting to see if the deal does price and what the yields look like.
On Tuesday, Barclays Capital won $120.14 million Nassau County, N.Y., Series 2016B general improvement bonds, as with a true interest cost of 2.45%. The bonds were priced to yield from 0.73% with a 5% coupon in 2017 to 2.63% with a 5% coupon in 2030. The issue is rated A2 by Moody's Investors Service, A-plus by Standard & Poor's and A by Fitch Ratings.
The county last competitively sold comparable bonds on May 20, 2015, when JPMorgan won $168.90 million of Series 2015B general improvement bonds with a TIC of 3.78%.
Piper Jaffray priced San Antonio's $217.73 million of water system junior lien revenue refunding bonds consisting of Series 2016A and Series 2016B taxable bonds. The $174.955 million of tax-exempt bonds were priced to yield from 0.74% with a 5% coupon in 2018 to 3.39% with a 3.25% coupon in 2040.
The $42.775 million of taxable bonds were priced 30 basis points above the comparable Treasury maturity in the 2018 and 2019 maturities; 115 basis points above the comparable Treasury maturity in 2028; 125 basis points above the comparable Treasury maturity and 133 basis points above the comparable Treasury maturity in 2030. The deal is rated Aa2 by Moody's and AA by S&P and Fitch.
Since 2006, the city of San Antonio has issued bonds an average of 7.2 times a year, selling about $12 billion, with the largest issuances in 2010 and 2012 when it offered $1.5 billion and $2.05 billion, respectively, and the lows in 2006 and 2011, when it issued $719 million and $411 million.
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.
Secondary Market
The yield on the 10-year benchmark muni general obligation closed out Tuesday four basis points lower to 1.68% from 1.72% on Monday, while the 30-year muni yield was three basis points lower to 2.72% from 2.75%, according to a final read of Municipal Market Data's triple-A scale.
Treasuries were stronger at Tuesday's close. The yield on the two-year Treasury fell to 0.75% from 0.81% on Monday, while the 10-year Treasury yield decreased to 1.86% from 1.96% and the 30-year Treasury bond yield was down to 2.67% from 2.78%.
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.
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.
