Municipals end weaker as market preps for $10.2 billion supply; L.A. County preps $900 billion

By Sheri Kasprzak

New York, June 1 – Municipal prices climbed on the session Monday following weaker Treasuries as the market readied for another heavy round of supply, traders reported.

Yields on top-rated municipals were higher by as much as 3 basis points, outperforming Treasuries, which saw yields rise by as much as 7 bps.

The 10-year Treasury note yield rose by 7 bps to 2.19%. The 30-year yield rose 6 bps to 2.94%, and the five-year yield rose by 6 bps to 1.55%.

Meanwhile, municipal funds are seeing outflows. Mutual fund flows were negative $138 million for the week of May 27, according to the Investment Company Institute, compared with negative $169 million for the previous week.

“May municipal bond issuance numbers are in, and supply is still being fueled by refunding activity, even though it was down slightly year over year,” Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC, said in a note Monday.

Refundings down YOY

May issuance came in at $30.4 billion, about 9% higher than May 2014, with refunding issuance at $10.4 billion, down 5% from the year-ago number.

“We do not see the slight drop in refundings as an indication such refundings are drying – there are plenty more to be had, especially at these interest-rate levels,” Kozlik noted.

“We continue to expect that refunding supply will be plentiful but that new money issuance will be down relative to the prior year.”

Given the still-tight fiscal situations many issuers are experiencing, many are choosing to control debt service, said Kozlik.

L.A. County TRANs ahead

Heading up the week’s busy new-issue calendar is a short-term note offering from Los Angeles County. The county is on the calendar with a $900 million sale of series 2015-2016 tax and revenue anticipation notes.

The notes, which are due June 30, 2016, will be offered through BofA Merrill Lynch and Citigroup Global Markets Inc.

Proceeds will fund county capital expenditures for the coming fiscal year.

Health-care bonds abound

The market will be bursting with both new-money and refunding deals from health-care issuers this week.

The largest deal comes from the Dormitory Authority of the State of New York, which is poised to bring $500 million of revenue bonds (A3/A-/) for the North Shore-Long Island Jewish Obligated Group on Wednesday.

That deal, which will price through senior managers Citi and Morgan Stanley & Co. LLC, will finance new capital projects and refund outstanding debt.

Franklin County, Ohio, is also in the market on Wednesday with a $281,585,000 offering of revenue bonds (Aa2/AA+/AA) for OhioHealth Corp.

Barclays is the underwriter for the deal, which will be used to acquire, construct and improve health facilities for the corporation and to finance capital expenditures.

Nebraska Methodist preps sale

Also on the horizon this week, the Nebraska Methodist Health System is eyeing a $228,905,000 offering of health facilities revenue and refunding bonds (/A-/A-) through Cain Brothers and J.P. Morgan Securities LLC.

The deal includes $28.32 million of bonds being sold through the Hospital Authority No. 2 of Douglas County and $200,585,000 of bonds being offered through the Hospital Authority No. 3 of Douglas County.

Proceeds will be used to acquire, construct, equip and improve the health system’s facilities in Omaha and to refund the system’s series 1997 bonds.

The Community Health Network of Indiana is slated to come to market Wednesday with $202.1 million of taxable bonds (A2/A/) through senior manager Wells Fargo Securities LLC.

Proceeds from that deal will be used to construct, equip and improve various projects for the health-care network and to repay an advance under a line of credit.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.