Taxable bonds

The Turnpike Authority of Kentucky expects to sell the bonds on June 6.

Jeffrey Scruggs, Managing Director and Head of Public Sector and Infrastructure Group at Goldman Sachs, sits down with Bond Buyer Executive Editor Lynne Funk on the state of the muni industry.

With a dearth of taxable muni supply and Build America Bond refundings, the university should see strong demand for this week's $500 million taxable corporate CUSIP bonds.

The Washington refunding deal is built on an extraordinary optional redemption of Build America Bonds despite criticism from investors who hold them.

Taxable munis have returned 1.48% month to date and 0.29% year-to-date while investment-grade munis have seen 0.44% returns so far in March and 0.05% year-to-date. USTs are in the black at 1.43% so far this month but returning -1.76% year-to-date while corporate bonds are returning 1.24% in March but -0.46% year-to-date.

Market participants said it is yet to be seen whether issuers will pull back their BABs refundings due to concerns after several bondholders sent a letter to the trustee on a Regents of the University of California deal, saying it was "prohibited" from executing the redemption.

High-yield and taxable munis continue to outperform, supply grows but concentrates in larger deals led by $3 billion of state personal income tax revenue bonds from the Dormitory Authority of the State of New York next week.

With a recent court ruling and higher interest rates in their favor, more issuers are likely call back their outstanding BABs using the extraordinary redemption provision.

This decision will accelerate foreign buyers' reduced presence in the muni market, said Vikram Rai, head of municipal markets strategy at Wells Fargo.

The Chicago Park District Board of Commissioners unanimously approved three ordinances laying the groundwork for up to $37 million new money bonds and a tender.

Most tax-exempt tenders saw low participation, which is good news to the taxpayers. The poorer the participation in the tender, the less is the waste from these premature refundings prior to the call date.

The city of Aurora, Illinois, is issuing an upfront loan to developer Penn Entertainment using bonds backed by tax increment financing district revenue.

Growing new-issue supply is "adding to bidders' 'wait-and-see' mentality with a variety of credits coming to market at favorable spreads," said FHN Financial's Kim Olsan. Next week's calendar hits $8.4 billion.

Participants are mixed on whether there will be continued growth in 2024, but some still see a universe of taxable bonds that still can be tendered.

With a high of $450 billion and a low of $330 billion, no firms currently see issuance surpassing the records hit in 2020 and 2021.

November's total volume rose 7.8% to $28.464 billion in 652 issues. For volume to top total 2022 issuance, December would need to see $44.329 billion of issuance.

A subpoena sent to the Oklahoma Corporation Commission this week seeks communications related to 2021's Winter Storm Uri and nearly $3 billion of utility securitizations that priced in 2022.

There will be "choppiness in the municipal bond market through the end of the year," said Anders S. Persson, Nuveen's chief investment officer for Global Fixed Income, and Daniel J. Close, Nuveen's head of municipals.

"Last year's successful social bond issuance has proven that there is growing investor demand for socially conscious investments and I am thrilled that we are able to offer this opportunity again," said City Comptroller Lander said.

A Wisconsin county has sold more than $200 million of bonds for broadband provider Bug Tussel to provide high-speed internet to rural customers in the state.