In the latest installment of Muni Minute, we take a quick look at the big tobacco bond sale coming from the Golden State Tobacco Securitization Corp. Jefferies will price over $600 million of the tobacco settlement asset-backed bonds this week. With muni yields still at historically low levels, investors seeking higher yielding assets may be willing to take on a bit more risk in order to get it.
VOICEOVER: Municipal bond investors searching for yield need look no further than at this week's $600 million tobacco bond sale out of California. Jefferies is set to price the Golden State Tobacco Securitization Corp's $619 million asset backed bonds on Thursday. The new tobacco settlement bonds will refund an older issue from 2007. Big tobacco bond sales from New York hit the market late last year.
The New York counties and Westchester deals both saw good demand from investors who got high yield from a typically lower-rated credit. With muni yields remaining at near historically low levels, investors seeking higher yield are willing to take on a bit more risk in order to get it. And Thursday's yield may only be the first of 2017 .
Illinois has been exploring a refunding of some of its $1.5 billion of 2010 tobacco bonds in order to save money, but has not yet pulled the trigger. As smoking rates continue to fall and e-cigarette use continues to rise tobacco bonds may be just what the doctor ordered to fight those low-yield muni bond blues.
I'm Chris Barnnet. This has been your mini minute.