Municipals end volatile week flat; another busy week ahead; Chicago hit with three downgrades

By Sheri Kasprzak

New York, May 15 – Municipals rounded out a week of extremes on a mostly flat note, sources said Friday.

Muni prices were mostly unchanged on the day, taking a breather from a beating throughout the week, said a trader. Supply remains extremely heavy.

About $10 billion of new offerings will price in the week ahead, led by a $1 billion two-tranche offering of senior bonds (A1/A+/AA-) from Florida’s Citizens Property Insurance Corp.

The corporation will offer $750 million of series 2015A-1 bonds and $250 million of series 2015A-2 Sifma index bonds through BofA Merrill Lynch and J.P. Morgan Securities LLC.

The corporation will use the proceeds from the deal to pay disaster claims for hurricane catastrophes.

Connecticut preps deal

Connecticut will be in the market again during the week ahead, this time with $481.62 million of series 2015C-D general obligation bonds through Loop Capital Markets LLC.

The state will offer $200 million of series 2015C bonds due 2017 to 2024 and $281.62 million of series 2015D refunding bonds due 2016 to 2024.

Proceeds from the deal will finance capital projects and refund the state’s series 2005 G.O. bonds.

The state sold $500 million of fixed-rate G.O. bonds during the week just ended with maturities from 2016 to 2035 and coupons from 2% to 5%.

Fitch, S&P downgrade Chicago

Elsewhere during the session, Fitch Ratings and Standard & Poor’s both cut Chicago’s G.O. debt after the Illinois Supreme Court invalidated a law that put limits on cost-of-living increases for pension recipients, a move that put the city in a $2.2 billion quandary.

Fitch dropped the city’s unlimited tax G.O. bonds to BBB+ from A-, and S&P lowered the city’s G.O. bonds to A- from A+. On Wednesday, Moody’s Investors Service cut the city’s rating to Ba1 from Baa2.

The ratings agencies were quick to move after the court’s decision because, as Moody’s analysts said in a statement, the city can no longer cope with shortfalls by curbing cost-of-living increases for pensioners. This means the city will have to come up with $2.2 billion to fund pensions.

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