In this weeks Muni Minute, we look at Chicago selling general obligation bonds after a yearlong absence in a deal that will attract institutional investors looking for high-yield despite risk. Despite the availability of and demand for yield, buyside players say the sale will be dominated by the institutional crowd and out of range for retail.
VOICE OVER: Chicago's $1 billion general obligation bond sale will be dominated by institutional buyers hungry for yield and buoyed by city pension funding gains. The city is hoping to calm market worries over its ongoing financial strains with investors meetings as it works to hold yields in check but headline and credit risks mean this week's offering will remain the domain of the institutional crowd.
It's rare that broker-dealers have approval for distribution of a high-yield credit like Chicago to retail investors. Michael Pietronico of Miller Tabak Asset Management said retail may shy away from the city due to its much publicized financial difficulties. The sale offers the first city GO paper to hit the primary market in a year and its rated BBB-plus by S&P and Kroll and BBB-minus by Fitch. But Moody's won't be rating the deal. Chicago Mayor Rahm Emanuel is unhappy with Moody's since it can't get the rating agency to budge from its junk rating and asked the agency to withdraw all its ratings. Moody's said no. I'm Chip Barnett, and this has been your Muni Minute.