Municipals end weaker with Treasuries ahead of $5 billion supply; Chicago BOE plans G.O. bonds

By Sheri Kasprzak

New York, Jan. 22 – Municipals rounded out the week lower, with yields on top-shelf bonds seen higher by as much as 5 basis points, market insiders reported.

The triple-A 10-year muni yield climbed by 5 bps to 1.86%, and the 30-year yield edged 2 bps higher to 2.80%.

Over in Treasuries, the 30-year bond yield rose by 4 bps to close the day at 2.83% and the 10-year benchmark note yield increased by 5 bps to 2.07%. The five-year note yield ended higher by 5 bps at 1.49%, and the two-year yield was up 4 bps at 0.88%. The market was pressured by stronger stocks and oil prices, buoyed in part by demand for heating oil ahead of the weekend’s East Coast snowstorm.

Troubled Chicago BOE eyes deal

Moving to the calendar for the week ahead, a little over $5 billion is slated to price.

That new supply will be led by the troubled Chicago Board of Education, which is on tap to bring $875 million of unlimited tax general obligation bonds. The deal, slated to price Wednesday, will likely face some difficulties as talk of a state takeover of the district and a possible bankruptcy swirl.

These pressures resulted in a Standard & Poor’s downgrade to B+ from BB and a Fitch downgrade to B+ from BB+ this week. Moody’s Investors Service dropped the board’s debt to B1 from Baa3 in December. Moody’s no longer rates the board.

According to the MMA, the board’s 5.25% bonds due 2035 traded at a 7.02% yield Thursday, compared with 6.51% two weeks ago.

On Friday, the board’s 5% bonds due 2029 were seen at 7.257% after closing Thursday at 7.457%.

The board plans to offer its G.O. bonds through senior managers J.P. Morgan Securities LLC and Barclays.

The deal includes $795,515,000 of series 2016A bonds due 2035, 2040 and 2044 and $79,485,000 of series 2016B taxable bonds due Dec. 1, 2033.

Proceeds will fund capital improvements and refund variable-rate debt and other bonds.

Massachusetts water deal set

Among the week’s competitive offerings, the Massachusetts Clean Water Trust is set to price $211,435,000 of revolving fund green bonds (Aaa/AAA/AAA) on Wednesday.

The bonds are due 2017 to 2046.

The trust will use the proceeds to finance or refinance the costs of wastewater and drinking water projects for governmental units and other eligible borrowers.

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