Friday

April 1, 2016

www.bloombergbriefs.com

 

Bloomberg AAA Benchmark Yields

DESCRIPTION CURRENT PREVIOUS NET CHANGE

BVAL Muni Benchmark 1T 0.59 0.62 -0.02

BVAL Muni Benchmark 2T 0.74 0.77 -0.03

BVAL Muni Benchmark 3T 0.86 0.87 -0.01

BVAL Muni Benchmark 4T 1.00 1.03 -0.02

BVAL Muni Benchmark 5T 1.14 1.17 -0.02

BVAL Muni Benchmark 6T 1.28 1.31 -0.03

BVAL Muni Benchmark 7T 1.39 1.43 -0.04

BVAL Muni Benchmark 8T 1.51 1.56 -0.06

BVAL Muni Benchmark 9T 1.63 1.69 -0.06

BVAL Muni Benchmark 10T 1.76 1.78 -0.03

BVAL Muni Benchmark 20T 2.38 2.43 -0.05

BVAL Muni Benchmark 30T 2.66 2.71 -0.05Source: GBY<GO>

Puerto Rico 'Not Serious' on Consensual Plan: InsurerBY MICHELLE KASKE, BLOOMBERG NEWS

Assured Guaranty Ltd. is seeking financial information from Puerto Rico, and is looking to Washington for help.

The bond insurer, which guarantees repayment on about $3.8 billion of commonwealth securities, sent a letter Wednesday addressed to Cleary Gottlieb Steen & Hamilton LLP, which is representing Puerto Rico in its attempt to restructure $70 billion of debt, detailing multiple requests for information. The letter, signed by Bruce

, Assured’s executive officer, was also sent to the U.S. Treasury Secretary, House SternSpeaker and other lawmakers working on legislation to address the island’s crisis.

Assured says that it has failed to receive complete financial information that it is entitled to as insurer of commonwealth securities after repeated appeals during the last 18 months, beginning with a request for Puerto Rico Highways & Transportation Authority maintenance agreements in September 2014. Assured is also seeking current balances for accounts that repay Highways debt and Puerto Rico Convention Center District Authority bonds after the two agencies began using reserve funds to make their Jan. 1 debt-service payments. Assured needs the data to plan for possible draws on its insurance policies, Stern wrote in the letter.

“The financial situation of the commonwealth and its public agencies remains opaque,” Stern said. “In the absence of a legitimate reason for this opacity, Assured is left to speculate what ulterior purpose the continued refusal to provide basic and readily-available financial information serves.”

Stern sent the letter as the House Natural Resources Committee plans to introduce on April 11 its bill that would establish a federal oversight board to manage any Puerto Rico debt restructuring and weigh in on annual budgets.

Puerto Rico has been in discussions with Assured and its advisers during the last two years as part of financial diligence on a variety of commonwealth issuers and to work out a restructuring plan, , a spokeswoman at SKDKnickerbocker, Barbara Morganwhich represents Puerto Rico’s Government Development Bank, said in an e-mail. “The timing of Assured’s letter is no doubt part of their lobbying strategy on the Hill against the Natural Resources Committee’s proposed legislation, but its allegations about the commonwealth stonewalling and withholding information are baseless,” Morgan said.

More on this story is available .here

MUNICIPALITY AMOUNT

Kansas City MO $333 million Rev

Guilford County NC $94 million GO

Central Dauphin SD PA $75 million GO

Port Arthur ISD TX $74 million GO

Purdue University IN $67 million RevSource: Bloomberg CDRA <GO>

AMOUNT OUTSTANDING

($MLNS)

MATURING NEXT 30

DAYS ($MLNS)

ANNOUNCED CALLS NEXT 30 DAYS ($MLNS)

3,548,900 8,862 7,684  Source: MBM<GO>

MUNI SHOW WITH TAYLOR & JOE

PRIMARY FIXED RATE

30-Day Supply Fixed: $9.3 Bln (LT)30-Day Supply Fixed: $132 Mln (ST)Sold YTD Fixed: $69.4 Bln (Neg LT)Sold YTD Fixed: $21.3 Bln (Comp LT)Sold YTD Fixed: $5.1 Bln (ST LT)

SECONDARY MARKET

MSRB: $19.6 BlnPICK: $16.3 Bln

VARIABLE RATE

SIFMA Muni Swap Rate: 0.4%Bloomberg Weekly AAA Rate: 0.41% Bloomberg Weekly AA Rate: 0.437% Daily Reset Inventory: $168 Mln  Weekly Reset Inventory: $2.8 Bln  

IN THE PIPELINE

SIZE OF MARKET

SUPPLY AND DEMAND

April 1, 2016 Bloomberg Brief Municipal Market 2

 

SUPPLY AND DEMANDMuni Yields Drop Below 1.80 Percent Driven by Continued Investor Demand

The weekly average municipal bond yield dropped below 1.80 percent for the first time in four weeks as supply lightened and investors continued to add cash to mutual funds.

Supply fell for the third straight week to $7.2 billion. Meanwhile, investors added cash to funds that report weekly to Lipper US Fund Flows for the 26th straight week to the tune of $783.9 million. Inflows into municipal bond mutual funds were down from the previous week's $906.5 million but above the four-week moving average of $745.9 million.

In March, supply soared to $45 billion from February's $31 billion. Inflows for the month increased to $3.2 billion, the most since December.

— Taylor Riggs, Bloomberg Radio

DIARY

Christie Says Atlantic City's $100,000-Plus Workers Show ExcessBY STACIE SHERMAN AND ELISE YOUNG, BLOOMBERG NEWS

Governor said Atlantic Chris ChristieCity’s finances are awash with extravagances — including 119 municipal employees who make more than $100,000 a year and a “Lamborghini-level” health-benefits plan — that he can’t cut without a takeover bill stalled in the New Jersey Assembly.

Christie, a second-term Republican, urged Assembly Speaker Vincent Prietoto put up for votes next week bills that would provide a cash infusion to the struggling gambling hub and give the state control over its operations. The speaker, a Secaucus Democrat, opposes a provision that would let the administration change or end collective-bargaining agreements with unions.

Prieto has asserted that the governor has the power to fix Atlantic City’s finances even without takeover legislation. Christie disagrees. He says the state lacks full authority to end the awarding of retirement pay, outsource waste-hauling

services or eliminate the “wildly expensive and overly generous” health plan.

Christie, during a news conference at his statehouse office, broke out charts to illustrate Atlantic City’s troubles. The city, he said, paid $6.6 million to retiring employees last year, including $320,000 to the deputy fire chief and deputy chief of police. Salaries of part-time council members total $300,000, he said. Most workers have a health-benefits plan “that's so rich that even this state government eliminated it nearly 20 years ago,” the governor said.

The legislation would empower the state to negotiate union contracts more affordable for the city, he said. Workers have to be willing to compromise, just like casinos that are owed property-tax refunds and bondholders invested in Atlantic City, he said.

Patrick Colligan, president of the state Policemen’s Benevolent Association union, was unimpressed. He said in a statement that a resolution would already have been reached "if Governor Christie

would devote even a third of the time he is spending these days behind a microphone, at a game, on television or, apparently, drawing up charts.”

Mayor warned last Don Guardianweek that without assistance, the city would run out of money in April until tax collections trickle in during May. City workers yesterday were voting on a plan to avoid a government shutdown by extending their pay periods.

After five years of piecemeal efforts to fix Atlantic City, Christie and state lawmakers proposed more drastic measures, including a takeover. Another proposal, to end the city’s gambling monopoly and allow casinos in the northern part of the state, passed the legislature this month and will go before voters in November.

Christie, who has supported the casino expansion measure, said he will oppose it if the Atlantic City takeover bill doesn’t reach his desk.

ACCORDING TO

Flows, Supply, Yields

April 1, 2016 Bloomberg Brief Municipal Market 3

ACCORDING TO

San Diego voters would decide whether to increase the city’s tax on hotel occupancy to help pay for a new $1 billion stadium for the National Football League Chargers and a $600 million convention center.

The team would contribute $350 million, the NFL would pay $300 million and the city would add $350 million through its hotel tax toward a 65,000 seat stadium, according to a proposal released Wednesday.

The increase in the tax on visitor stays by 6 percentage points to 16.5 percent would back about $1.15 billion of municipal bonds, which would fund the city’s contribution, the convention center and land acquisition.

Mayor praised the Kevin Faulconerdeal as being more than a stadium with the inclusion of the convention center.

Tax for Stadium “My top priorities are to protect jobs, protect taxpayers and do what’s right for all San Diegans,” said Faulconer, in an e-mailed statement. “I will evaluate the proposal’s details through that lens."

The Chargers had been one of three teams seeking to move to Los Angeles last year before the NFL approved a move by the St. Louis Rams. When the NFL approved the Rams’ move in January, it left open the possibility that the Chargers could share the team’s stadium in Inglewood, California.

The Chargers and supporters of the proposal must gather 66,447 signatures from registered voters by mid-June of the proposal to be on the ballot in November.

— Darrell Preston, Bloomberg News

The Port Authority should prioritize a new New York City bus terminal over an

Dueling Projects

extension of the PATH subway from lower Manhattan to Newark Liberty International Airport, New Jersey’s top elected Democrat said Thursday.

“We have to fund the things that are the most important,” said New Jersey Senate President at Stephen Sweeneya news conference in the Port Authority of New York and New Jersey bus terminal in midtown. “This bus terminal is going from 120,000 riders each way to 240 in 2040.”

New York Governor Andrew Cuomoand New Jersey Governor Chris Christiehave also committed to funding half of a $20 billion project to build a new rail tunnel under the Hudson River. As with the bus terminal, the two states haven’t identified a funding source for the project called Gateway.

— Martin Z. Braun, Bloomberg News

  

CREDIT CLOSE-UP

April 1, 2016 Bloomberg Brief Municipal Market 4

CREDIT CLOSE-UP

Muni Funds See Most Cash Since '12 on Best Risk-Adjusted ReturnsBY BRIAN CHAPPATTA, BLOOMBERG NEWS

When it comes to risk-adjusted returns, municipal bonds still can’t be beat. And individual investors are taking notice.

The $3.7 trillion municipal market earned about 0.3 percent in March, building on gains of 1.1 percent and 0.1 percent in January and February, Bank of America Merrill Lynch data show. It’s just the second time since 2002 that the debt has posted three straight positive months to start the year. While the first-quarter return is merely on par with the average over the past decade, individuals are pouring money into tax-exempt bonds anyway. They’ve added to municipal bond mutual funds for 26 straight weeks dating back to October, the longest streak since 2012, Lipper US Fund Flows data show.

With tax-exempt interest rates near the lowest since the 1960s, munis don’t seem alluring on their own. Rather, they offer a combination of relatively higher yields and lower volatility that’s hard to match in the global markets, explaining why individuals continue to favor them, according to investors and analysts at BlackRock Inc., Loop Capital Markets, Oppenheimer & Co. and Vanguard Group Inc. When adjusted for price swings, state and local bonds performed better than many major asset classes in the first quarter, just as they did last year.

“As long as rates stay where they are right now, and you get to earn the coupon, I think retail investors are OK with that,” said , chief Chris Mierstrategist at Loop Capital Markets in Chicago. “Munis are a good place to hide.”

When accounting for risk, as measured by price volatility, the broad municipal market earned 0.95 percent in the first quarter through March 30, data compiled by Bloomberg show. That edges the 0.94 percent return on investment-grade corporate bonds. U.S. Treasuries, high-yield company debt, commodities and the Standard & Poor’s 500 index of stocks gained 0.75 percent, 0.36 percent, 0.12 percent and 0.08 percent, respectively.

Last year, munis did even better, returning 2 percent on a risk-adjusted

basis while other assets either eked out gains or declined.

U.S. stocks plunged briefly into a correction in August 2015, which may have steered some investors into munis, Mier said. The current streak of inflows, totaling about $22 billion, began in the first week of October.

The S&P 500 recouped most of its losses later last year, only to plunge to the lowest in nearly two years on Feb. 11. The same week the index touched the low, investors added $941 million to muni funds, the fourth-largest inflow of the current stretch.

“Oftentimes we see investors looking in the rear-view mirror — they look at what has done well and buy that,” said Chris

, head of munis in Malvern, AlwinePennsylvania, at Vanguard, which oversees $157 billion of the debt. “We’ve been a bit surprised by the level of inflow.”

April will test demand for munis — funds have seen outflows in at least one of the first two weeks of the month each year since 2010, Lipper data show. That's because individuals tend to raise cash ahead of the U.S. tax-filing deadline in mid-April.

Investors may also react to price declines from mid-February to mid-March, which drove benchmark 10-year yields up 0.3 percentage point to 1.87 percent, said

Sean Carney, head of municipal strategy at BlackRock in New York.

“Many look at fund flows in the municipal-bond market as a leading indicator, when in all actuality they’re a lagging indicator — they lag past performance,” said Carney, whose firm oversees $110 billion in munis. “It wouldn't be surprising if we were to begin to see fund flows compress a bit. They’ve been very strong.”

Tax season also has a positive effect for munis: reminding investors how much they pay, and what they could save by earning tax-exempt interest. Including a 3.8 percent levy on the investment income of top earners resulting from the 2010 Patient Protection and Affordable Care Act, the highest federal rate is 43.4 percent.

That means the 1.75 percent yield on benchmark 10-year munis is equivalent to 3.1 percent on a taxable basis for top earners. That compares with 1.77 percent on U.S. Treasuries.

“People are looking at this external volatility and they want to put their money into something that’s more stable and consistent,” said , head of Jeffrey Liptonmunicipal research at Oppenheimer in New York. “If you’re within the upper income-tax brackets, and if diversification and preservation of capital is an important investment objective, why wouldn’t you put money into munis?”

RESULTS OF SALES

Little Changed, Little Problem

April 1, 2016 Bloomberg Brief Municipal Market 5

Long-Term Bond Sales Results

SELLING DATE

ISSUE STATE RATING TAXAMT

($Mlns)1

YEAR5 YEAR

10 YEAR

20 YEAR

STATUS TYPE SENIOR MANAGER

03/28 Ca St Univ Trustees    -A CA Aa2/AA-/ N 1133.112.000/0.600

5.000/1.240

5.000/1.960

5.000/2.700

Final Negt Barclays Capital Inc

03/28 Hawaii     Ser Fe    -Ref HI Aa2/AA/AA N 219.735.000/1.280

5.000/1.970

Repriced NegtBank Of America Merrill Lynch

03/28Pennsylvania Hgr Edu Facs

PA Aa1// N 169.645.000/0.610

5.000/1.270

5.000/1.980

4.000/2.930

Final NegtBank Of America Merrill Lynch

03/28 Hawaii -Txbl- Ser Ff- Ref HI Aa2/AA/AA T 119.781.934/

100.0002.652/

100.000Repriced Negt

Bank Of America Merrill Lynch

03/28 Westchester Co -Ref NYAa1e

//AAAeN 110.03

2.000/0.520

5.000/1.070

5.000/1.730

Repriced Negt Citigroup Global Mkts Inc

03/3112:00

Long Beach Usd-Ref CA Aa2/AA-/ N 139.375.000/0.500

5.000/1.120

5.000/1.840

Awarded Comp Citigroup Global Mkts Inc

*Moody's/S&P/Fitch

Most Active Bonds

DESCRIPTION STATE DATED COUPON MATURITY VOLUME PRICED AVERAGE YIELD AVERAGE NO. OF TRADES

Johnson Usd #230 Ref KS 03/15/07 4.000 09/01/23 151,440,000 104.174 1.010 32

Lorain Sd Ref-Classrm OH 12/28/06 4.250 12/01/20 135,060,000 102.130 0.994 34

Tampa Hlth Sys-A FL 04/13/16 4.000 11/15/46 117,800,000 103.576 3.572 107

Tampa Hlth Sys-A FL 04/13/16 5.000 11/15/46 99,370,000 116.231 3.113 56

Ca Mun Fin-Var-Ref CA 07/01/10 N.A. 09/01/21 57,230,000 100.000 N.A. 38

Houston Isd-A-Ref TX 04/01/16 5.000 02/15/31 51,500,000 122.121 2.456 14

Houston Isd-A-Ref TX 04/01/16 5.000 02/15/29 47,000,000 123.516 2.314 10

Univ Of Mi-Var-B MI 03/01/12 N.A. 04/01/42 46,700,000 100.000 0.000 14

New York St Urban Dev NY 03/17/16 5.000 03/15/26 42,200,000 126.783 2.015 12

Houston Isd-A-Ref TX 04/01/16 4.000 02/15/40 39,680,000 107.558 3.103 30

Houston Isd-A-Ref TX 04/01/16 5.000 02/15/30 39,345,000 122.748 2.392 11

Houston Isd-A-Ref TX 04/01/16 5.000 02/15/27 36,250,000 125.366 2.129 11

Houston Isd-A-Ref TX 04/01/16 5.000 02/15/26 36,000,000 126.786 1.989 16

Houston Isd-A-Ref TX 04/01/16 5.000 02/15/24 34,145,000 123.759 1.745 17

Houston Isd-A-Ref TX 04/01/16 4.000 02/15/41 33,635,000 107.084 3.157 29

Lower Neches Vly-Ref TX 05/17/12 N.A. 05/01/46 33,480,000 100.000 0.000 10

Houston Isd-A-Ref TX 04/01/16 5.000 02/15/25 31,320,000 125.325 1.878 21

Univ Of Mn Rgts-A MN 04/13/16 5.000 04/01/41 29,580,000 119.223 2.778 24

Mission Econ-Var-A TX 05/22/08 N.A. 01/01/20 29,000,000 100.000 N.A. 7

Pa Econ Dev-Var-Ref-A PA 10/01/10 N.A. 04/01/19 28,000,000 100.000 N.A. 9

Houston Isd-A-Ref TX 04/01/16 4.000 02/15/39 26,255,000 107.910 3.063 21

Houston Isd-A-Ref TX 04/01/16 4.000 02/15/37 25,150,000 108.125 3.038 11

Houston Isd-A-Ref TX 04/01/16 5.000 02/15/28 25,100,000 124.253 2.240 9

RESULTS OF SALES

TRADING

BREAKING NEWS

April 1, 2016 Bloomberg Brief Municipal Market 6

 

Top Traded Borrowers in the Municipal Market 3/25/16 to 3/31/16 ($Mln)

ISSUE BORROWER VOLUME CUSTOMER SELLS CUSTOMER BUYS NET DEALER TO DEALER VOLUME

1 California State University 1496 108 930 -822 458

2 State of California 941 216 314 -97 412

3 Houston Independent School District 750 58 530 -472 162

4 New York State Urban Development Corp 532 127 160 -34 245

5 City of New York NY 370 94 163 -69 114

6 Metropolitan Transportation Authority 338 65 110 -45 163

7 State of Connecticut 331 72 81 -9 179

8 State of Washington 331 100 99 1 131

  Total     31,953   7,483   13,795   -6,311   10,675Source: MFLO<GO>* Volume numbers treat trades>$5MM as $5MM due to MSRB reporting restrictions

BREAKING NEWS

U.S. Urges Memphis Ministry to Sell Three Bond-Funded Complexes    BY MARTIN Z. BRAUN, BLOOMBERG NEWS

The U.S. Department of Housing and Urban Development has “lost confidence” in a Memphis-area ministry’s ability to manage its portfolio of low-income housing and urged it to sell three of its municipal bond-financed apartment complexes in Florida.

In a March 24 letter to the Global Ministries Foundation president, Rev.

, HUD said recent Richard Hamletinspections of the non-profit’s complexes in Jacksonville and Orlando found exposed wiring, decades-old cabinets and “band-aid” fixes such as using painted duct tape to cover holes or painting over untreated mildew.

“HUD is extremely concerned by GMF’s quick fix approach to maintenance at its properties,” wrote , Priya JayachandranHUD Deputy Assistant Secretary for Multifamily Housing. “While HUD will continue to closely monitor the conditions at all of the GMF properties in Florida to ensure that GMF addresses these problems with long-term sustainable and permanent repairs, HUD has lost confidence in GMF’s ability to manage its large portfolio.”

GMF, a Cordova, Tennessee, non-profit founded in 2003, has raised $400 million to finance the acquisition and operation of

60 multifamily complexes in eight states. The non-profit issued municipal bonds through “conduits,” -- local agencies with few, if any, employees and that exist only to sell tax-exempt debt for a fee.

“The leadership of Global Ministries’ affordable housing program takes the allegations raised by HUD’s deputy assistant secretary very seriously,” Hamlet said in e-mailed statement to Bloomberg News. “We are working closely with HUD and impacted stakeholders to continue the work underway to improve our properties.”

GMF is working with government housing officials to ensure the properties comply with all federal and state laws, regulations and local codes, said Hamlet.

“GMF remains unwavering in its commitment to restoring safe, comfortable, and affordable housing for families in need,” he said.

HUD visited GMF’s Eureka Gardens Apartments and Washington Heights apartments in Jacksonville and the Windsor Cove Apartments in Orlando on March 17 and 18. The three complexes have 852 units.

GMF sold $34 million of tax-exempt debt through the Capital Trust Agency, to purchase the Jacksonville properties and four others in the city in 2012. Capital Trust is a conduit located in Gulf Breeze,

Florida, 360 miles away. Capital Trust also sold $11.3 million in 2012 to finance GMF’s acquisition of Windsor Cove in Orlando.

The primary source of revenue backing the bonds are rent subsidies from HUD. Last month HUD cut off subsidies to two GMF properties in Memphis because GMF failed to maintain the properties in a “safe and sanitary manner.” The loss of the federal funds caused the securities to default, pushing the price to as little as 21 cents on the dollar.

Bondholders of the GMF properties in Jacksonville and Orlando would lose money if the non-profit sold the apartments for less than they purchased them.

On March 30, GMF’s Jacksonville bonds with a 4.25 percent coupon maturing in 2035 traded at average price of 98.4 cents on the dollar. The same day, an investor bought $115,000 of of GMF’s Orlando bonds with a 5 percent coupon maturing in 2047 for 99 cents on the dollar. The bonds carry an A rating from Standard & Poor’s.

Following visits to some buildings, S&P put 25 GMF-backed bond issues on review for a downgrade last month, saying a decision to withhold funding from other complexes could jeopardize the money used to repay investors.

MSRB MARKET FLOW

TWEET OF THE DAY BY JOE MYSAK, BLOOMBERG BRIEF

April 1, 2016 Bloomberg Brief Municipal Market 7

 

Find Muni Data on the Bloomberg Terminal

DATA FREQUENCY ON THE TERMINAL

AAA Benchmark Valuation Daily GC I493 <GO>

Benchmark State Yields Daily MBM <GO>

VRDO Rates, Inventory Daily MBIX <GO>, ALLX BVRD <GO>

Upcoming Sales Daily CDRA <GO>

Volume, MSRB, PICK Daily SPLY <GO>, YTDM <GO>, MSRB <GO>, MBIX <GO>

Results of Sales Daily CDRA <GO>

Most Active Daily MSRB <GO>

Most Searched DES Every Wednesday SECF <GO>

Variable-Rate Calendar Every Thursday CDRV <GO>

Most Traded Borrowers Every Friday MFLO <GO>

Week-Ahead Calendar Every Monday CDRA <GO>

Supply and Demand Every Friday SPLY <GO>, BVMB <GO>

Muni Credit Risk Every Monday MRSK <GO>

TWEET OF THE DAY BY JOE MYSAK, BLOOMBERG BRIEF

Puerto Rico Is Its Own Worst Enemy

Kristi Culpepper@munilass

PR officials are the biggest obstacle to island getting the financial relief it needs. They don't want to let anyone in to see dirty work.Details

The long-time market observer opines on Puerto Rico, where officials are balking at the idea of an independent control board overseeing the island's finances, which remain unaudited.  

 

  

 

 

 

 

Bloomberg Brief:Municipal Market

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