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Tuesday
May 31, 2016
www.bloombergbriefs.com
Bloomberg AAA Benchmark Yields
DESCRIPTION CURRENT PREVIOUS NET CHANGE
BVAL Muni Benchmark 1T 0.60 0.60 0
BVAL Muni Benchmark 2T 0.74 0.74 0
BVAL Muni Benchmark 3T 0.84 0.84 0
BVAL Muni Benchmark 4T 0.97 0.97 0
BVAL Muni Benchmark 5T 1.08 1.08 0
BVAL Muni Benchmark 6T 1.18 1.18 0
BVAL Muni Benchmark 7T 1.30 1.30 0
BVAL Muni Benchmark 8T 1.40 1.40 0
BVAL Muni Benchmark 9T 1.52 1.52 0
BVAL Muni Benchmark 10T 1.63 1.63 0
BVAL Muni Benchmark 20T 2.22 2.22 0
BVAL Muni Benchmark 30T 2.48 2.48 0Source: GBY<GO>, GC I493 <GO>
Illinois Lawmakers Override Chicago Pension Veto BY ELIZABETH CAMPBELL, BLOOMBERG NEWS
Illinois lawmakers overrode Governor s veto of a law that gives Bruce Rauner’Chicago a partial break on its pension payments to police and fire retirement funds.
The House followed the Senate’s vote yesterday to nix the veto. Rauner, a first-term Republican locked in a record budget impasse with Democrats who lead the legislature, vetoed the bill on Friday.
The law gives Chicago 40 years instead of 25 to get its public-safety pensions to 90 percent funded and reduces this year’s required contribution to the public safety pensions by $220 million. Mayor had slammed Rauner’s veto, saying it Rahm Emanuel would force a property tax increase.
“I don’t think it’s fair to the taxpayers of Chicago to say we’re going to double your property tax bill this year,” Representative a Democrat from Chicago, Barbara Currie,said before the House voted to override the veto. The bill “is a responsible approach to funding pension problems.”
Chicago is caught in the partisan standoff between Rauner and legislative Democrats. Illinois hasn’t had a budget for 11 months. There are little signs of progress on reaching a compromise by the end of the regular legislative session today. Rauner wants any solution to include some of his agenda items like changes to workers compensation costs, limits on unions and property tax relief. These proposals have encountered resistance from Democrats.
On Sunday, Rauner described the bill he vetoed as “bad policy,” saying it would allow Chicago to reduce pension payments, costing taxpayers money in the long run. Previously, the governor had said he would consider signing the bill if it was part of a package of structural changes. The veto is “harmful to taxpayers,” according to a statement from Emanuel on Friday.
STATE YIELD SPREAD TO AAA CHANGE
CA 1.87 24 0
FL 1.81 18 0
IL 3.46 183 0
NY 1.70 7 0
PA 2.27 64 0
TX 1.88 26 0
MUNICIPALITY AMOUNT
New York University $837 million Rev
Pima County AZ $203 million Rev
Florida $145 million GO
Pennsylvania $991 million GO
Maryland $1 billion GOSource: Bloomberg CDRA <GO>
AMOUNT OUTSTANDING
($MLNS)
MATURING NEXT 30
DAYS ($MLNS)
ANNOUNCED CALLS NEXT 30 DAYS ($MLNS)
3,585,441 18,277 12,014Source: MBM<GO>
BENCHMARK STATES 10-YEAR
PRIMARY FIXED RATE
30-Day Supply Fixed: $10.5 Bln (LT)30-Day Supply Fixed: $588 Mln (ST)Sold YTD Fixed: $122.4 Bln (Neg LT)Sold YTD Fixed: $37 Bln (Comp LT)Sold YTD Fixed: $7.5 Bln (ST)
SECONDARY MARKET
MSRB: $12.3 BlnPICK: $15.4 Bln
VARIABLE RATE
SIFMA Muni Swap Rate: 0.4%Bloomberg Weekly AAA Rate: 0.402% Bloomberg Weekly AA Rate: 0.417% Daily Reset Inventory: $207 Mln Weekly Reset Inventory: $1.3 Bln
IN THE PIPELINE
SIZE OF MARKET
CREDIT CLOSE-UP
May 31, 2016 Bloomberg Brief Municipal Market 2
CREDIT CLOSE-UPMore in Debt Than Puerto Rico, the Virgin Islands Rejects RescueBY BRIAN CHAPPATTA, BLOOMBERG NEWS
Congress’s plan to throw a lifeline to Puerto Rico is making waves in the U.S. Virgin Islands.
The measure that passed a House committee last week would allow for a federal control board to oversee the finances — and potentially restructure the debt — of any U.S. territory, even though Puerto Rico is the only one now asking for help. Virgin Islands Governor
and Rep.Kenneth Mapp Stacey have blasted the bill, warning Plaskett
that it may tarnish its standing with investors. That concern is already starting to materialize: Returns on its securities are trailing the $3.7 trillion municipal market for the first time since 2011.
The Caribbean island, Puerto Rico’s closest American neighbor, has a sliver of the population — about 104,300 — and a fraction of the debt, with $2.4 billion across all issuers. But divvied up, that’s $23,000 of obligations per person, even more than Puerto Rico’s $20,000. The two Caribbean territories with a shared culture also have similar fiscal strains: declining populations, underfunded pensions, histories of borrowing to cover budget shortfalls and unemployment rates that are twice as high as the U.S. mainland’s.
“It’s the same template: Over a period of years, you keep issuing debt to cover your operating deficits, your economy isn't growing, your population isn’t growing, but your liabilities keep growing,” said an David Ashley, associate portfolio manager at Thornburg Investment Management, which holds $11.5 billion in municipal bonds. “Just by virtue of math, your per-capita debt just continues to rise, probably to an unsustainable level at a certain point.”
Territory bonds have long lured buyers across the U.S. because the interest on the securities isn’t taxed at the federal, state or local level. And unlike some American local governments, the territories — American Samoa, Guam, Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands — can’t file for bankruptcy. That made investors confident they’d be paid back, a faith that was lost as Puerto Rico defaulted and
Congress advanced legislation providing a way for distressed territories to reduce their debts in court if needed.
Virgin Islands leaders insist the government can and will pay what it owes, in part because of the way the bonds are structured. Many securities are backed by specific revenue streams, like excise taxes tied to rum production by Diageo Plc and Cruzan International Inc., that go straight from the U.S. Treasury to an escrow agent. Even bonds backed by gross receipt taxes, which offering documents say are “secured by its full faith and credit and taxing power,” also give the trustee a lien on the levies.
"We’re in a precarious situation — we have an enormous budget
deficit and we’ve been struggling with that for
quite some time."— STACEY PLASKETT, DELEGATE TO HOUSE OF REPRESENTATIVES FROM
THE U.S. VIRGIN ISLANDS
Virgin Islands officials say they’ve had to borrow to make up for discrepancies in how the federal government funds territories relative to states. They’ve called on Congress to extend tax credits for low-income workers to their residents and bolster Medicare and Medicaid paymentsas well. None of that was included in the Puerto Rico bill.
“Congress has passed the buck and hasn’t done what they needed to do for many years,” Plaskett, the Virgin Islands's non-voting representative in Washington, said in a telephone interview. “We’re already operating at a disadvantage to the other states, and have had to utilize other monies, such as bonds, to pay for everyday expenses that the people of the territories need.”
In a year when municipal-bond investors can’t get enough high-yielding bonds, the Virgin Islands are an exception. The territory’s debt has gained 2.2 percent so far in 2016, compared with 2.8 percent for all municipal securities, S&P Dow Jones Indices data show. It would be the first time since 2011 its obligations have trailed the market.
Its securities are mostly in the lowest investment-grade tier, unlike Puerto Rico's, which are deemed virtually certain to default. If the Virgin Islands issued pure general obligations, however, Fitch Ratings says it would rate them BB-, the third-highest junk rank.
“In terms of the debt load, on a per-capita basis, on an income basis, it’s high,” said the Fitch Marcy Block, analyst who tracks the Virgin Islands.
Aside from indebtedness, the Virgin Islands is grappling with similar economic and demographic trends as its beleaguered Caribbean counterpart.
The Virgin Islands’s real gross domestic product dropped in each of four years through 2014, according to data from the Bureau of Economic Analysis. Like Puerto Rico’s, its contraction has been exaggerated by migration as residents leave in search of jobs.
The Department of Interior said in a September 2011 report that the Virgin Islands’s pension plan may be unable to pay what it promised by 2025, though a measure passed last year could delay that by a few years.
Mapp, who’s unaffiliated with a political party, said in his first budget message a year ago that the territory’s general-fund revenue hasn’t been enough to cover expenses for the past two decades. The island may end this year in deficit as well.
Yet he says the Virgin Islands “have no financial issues close to or mirroring those of Puerto Rico.”
“We’re in a precarious situation — we have an enormous budget deficit and we've been struggling with that for quite some time,” Plaskett said. “Should we be using bonds for operating costs? I have always argued no, but it’s a necessity because Congress has not done its responsibility to give economic tools and support to the territories to be able to grow their own economies.”
May 31, 2016 Bloomberg Brief Municipal Market 3
DIARY
May 31, 2016 Bloomberg Brief Municipal Market 4
DIARY
Atlantic City Financial Rescue Plan Signed by Governor ChristieBY ROMY VARGHESE AND ELISE YOUNG, BLOOMBERG NEWS
New Jersey Governor Chris Christiesigned two bills that will pull Atlantic City from the brink of bankruptcy and give the troubled gambling hub about five months to right its finances — a task that if unmet would result in an unprecedented state takeover.
The measures will infuse the resort town with enough cash to pay bills and workers through October.
Officials have until about then to craft a five-year plan to restore fiscal stability for a community where the tax base has tumbled by more than two thirds since 2010 as gaming competition increased in nearby states. If they fail, the city would
fall under the control of the state, which could sell its assets and void or change labor contracts through expansive powers awarded by the legislation.
“Atlantic City’s government has not demonstrated the competence to properly manage the people’s money without state guidance and oversight,” Christie said in a statement Friday. “This legislation means no more business as usual.”
Under the agreement, the state would provide Atlantic City with a bridge loan. Some gambling proceeds that go toward marketing would flow to the city, which would also receive fixed payments from casinos instead of property taxes to prevent the assessment appeals that have strained its finances.
Atlantic City, which once had a monopoly on gambling on the East Coast, has been veering toward insolvency since a third of its parlors closed in 2014. To avert a shutdown of city services, the 39,000-resident community lengthened worker pay periods last month. Mayor Don Guardianwarned the city could run out of money in June.
No New Jersey city has defaulted or entered court protection since the Great Depression. S&P Global Ratings said that even state intervention may not forestall a default or bondholder losses, and Moody’s said a "high degree of uncertainty" remains for solving the city’s problems.
Billionaire-Led Hedge Fund Bridgewater Lands Connecticut Aid BY BRIAN CHAPPATTA AND KATIA PORZECANSKI, BLOOMBERG NEWS
Bridgewater Associates LP, the world’s largest hedge fund, will receive $22 million in aid from Connecticut, which has been working to keep businesses from leaving the state.
The firm, led by billionaire , Ray Daliowas approved for a $5 million grant and a $17 million loan to expand in Westport, Wilton and Norwalk, according to minutes of the state bond commission’s meeting on Friday. The loan may be forgiven if Bridgewater, which manages about $150 billion, retains some 1,400 jobs and creates 750 new ones through 2021.
Connecticut was in direct competition with states including New York when talks over the funding began with Bridgewater in 2012, Democratic Governor said at the Dannel Malloymeeting.
The company is receiving the assistance as hedge funds come under scrutiny from clients, including public pension funds, for charging hefty fees while delivering lackluster results.
“We were aware of specific campuses in other states we were competing with,” Malloy said. “I wish we didn’t compete that way, that dollars were not part of the competition, but the reality is that they are.”
The measure drew rebukes from State Representative and Christopher DavisComptroller , who said Kevin LemboConnecticut can’t afford to be “picking winners and losers” when its stagnant economy led to two credit downgrades this month. Davis told Malloy at the meeting that Bridgewater can afford the cost of the expansion without public funds and that it came to the state “as a lender of first resort.”
Connecticut is the wealthiest U.S. state, yet has had difficulty balancing budgets as its finance-based economy struggles to rebound from the last recession. Malloy has pushed through tax increases to fill the shortfalls, though he now warns of a “new economic reality” that must be addressed with spending cuts.
The state has turned to financial incentives to keep companies within its borders.
It suffered a blow earlier this year when General Electric Co.announced it would move its headquarters to Boston, after residing in Fairfield since 1974. That came even after Malloy pulled back on a plan to raise business levies that led GE to look elsewhere.
Other financial companies have received loans like the one approved for Bridgewater. In October 2014, Connecticut extended through 2021 an agreement with UBS AG that gave the bank a $20 million loan that doesn’t have to be repaid if it keeps at least 2,000 employees in-state.
Bridgewater was founded by Dalio in 1975 from his two-bedroom apartment. Its Pure Alpha fund tumbled 6.7 percent in the first quarter of this year, according to a person familiar with the returns.
Dalio earned about $1.4 billion last year, according to Institutional Investor’s Alpha’s 2016 Rich List. He’s worth about $14.1 billion, ranking him the 60th richest person in the world, according to the Bloomberg Billionaires Index.
May 31, 2016 Bloomberg Brief Municipal Market 5
RESULTS OF SALES
May 31, 2016 Bloomberg Brief Municipal Market 6
Long-Term Bond Sales Results
SELLING DATE
ISSUE STATE RATING TAXAMT
($Mlns)1 YEAR 5 YEAR 10 YEAR 20 YEAR STATUS TYPE SENIOR MANAGER
05/23Mass Ed Fin Auth-Amt-Ref
MA //Ae A 340.005.000/2.360
Final NegtRBC Capital Markets Llc
05/23 Los Angeles Dept Wtr Pwr CA Aa2//AA N 265.735.000/1.090
5.000/1.760
5.000/2.380
Final Negt Barclays Capital Inc
05/23 Miami-Dade Co 2015-D FL Aa2/AA/ N 227.222.000/0.570
5.000/1.290
5.000/1.970
5.000/2.610
Final NegtRBC Capital Markets Llc
05/23 Mn Hsg Fin Agy -Amt -A MNAa1
/AA+/A 63.14
0.950/100.000
1.750/100.000
2.700/100.000
Final NegtRBC Capital Markets Llc
*Moody's/S&P/Fitch
Most Active Bonds
DESCRIPTION STATE DATED COUPON MATURITY VOLUME PRICED AVERAGE YIELD AVERAGE NO. OF TRADES
Ma Edu Fing-J-Amt MA 06/16/16 3.500 07/01/33 100,985,000 98.538 3.612 33
Chicago Midway Arpt-B IL 06/01/16 5.000 01/01/46 72,270,000 116.344 3.020 35
Univ Of Mi-Var-B MI 03/01/12 N.A. 04/01/42 53,020,000 100.000 0.000 14
Washington Tran-A DC 06/08/16 4.000 07/01/19 42,450,000 105.880 1.110 19
Chicago Midway Arpt-B IL 06/01/16 5.000 01/01/41 36,700,000 116.661 2.987 12
Nj Hlth Care-A-Ref NJ 06/30/16 3.000 07/01/32 31,710,000 98.364 3.131 55
San Diego Pub Facs-B CA 06/23/16 5.000 08/01/25 28,615,000 127.148 1.760 21
Pennsylvania St Turnp PA 06/07/16 4.000 06/01/33 28,195,000 107.772 3.090 62
Nj Hlth Care-A-Ref NJ 06/30/16 4.000 07/01/41 27,170,000 105.851 3.308 18
Washington Tran-A DC 06/08/16 5.000 07/01/18 26,750,000 108.107 1.020 8
Met Trans Auth -B-1 NY 05/26/16 5.000 11/15/36 25,530,000 122.628 2.524 17
Mission Econ Dev-A TX 05/04/16 5.750 10/01/31 25,500,000 105.804 4.341 7
Lower Neches-Exxon TX 11/17/11 N.A. 11/01/51 25,400,000 100.000 0.000 6
San Diego Facs Ref-A CA 03/12/07 5.250 02/15/32 25,125,000 103.363 0.507 15
Nyc Muni Wtr-Ff-Ref NY 03/17/15 5.000 06/15/39 25,080,000 120.112 2.500 14
Mn Hsg Fin Agy-A-Amt MN 06/22/16 3.100 07/01/31 23,280,000 100.000 3.100 12
New York St Thruway A NY 05/12/16 5.000 01/01/51 21,415,000 117.697 2.875 13
San Diego Pub Facs-B CA 06/23/16 5.000 08/01/23 21,060,000 123.806 1.460 13
Nj Hlth Care-A-Ref NJ 06/30/16 3.250 07/01/36 21,010,000 98.650 3.343 49
Sierra Ridge Metro-A CO 06/02/16 5.500 12/01/46 20,515,000 103.426 5.000 15
Houston-Utl Sys-B-Ref TX 03/08/16 5.000 11/15/35 20,200,000 122.806 2.507 6
San Diego Pub Facs-B CA 06/23/16 5.000 08/01/20 20,080,000 115.782 1.061 11
San Diego Pub Facs-B CA 06/23/16 5.000 08/01/28 20,025,000 126.279 2.100 9
RESULTS OF SALES
TRADING
CALENDAR — SCHEDULED SALES
May 31, 2016 Bloomberg Brief Municipal Market 7
CALENDAR — SCHEDULED SALES
SELLING ISSUE STATE AMT ($MLNS) TAX SENIOR MANAGER STATUS TYPE
05/30 Hutto Isd-Ref TX 794.20 Q Stifel Nicolaus & Co Inc Wed Negt
05/30 Dasny -A NY 591.66 N Morgan Stanley & Co Llc Wed Negt
05/30 Columbia Dis -A DC 421.78 N JP Morgan Securities Llc Day/Day Negt
05/30 Dasny -B -Txbl NY 245.04 T Wells Fargo Bank Na Wed Negt
05/30 Rhode Island Comm Corp -A RI 229.07 N Bank Of America Merrill Lynch Thur Negt
05/30 San Diego Co Wtr Auth -B CA 196.95 N Citigroup Global Mkts Inc Thur Negt
05/30 El Paso TX 167.48 N Citigroup Global Mkts Inc Thur Negt
05/30 Sacramento Mud Elec Rev-D CA 149.48 N Barclays Capital Inc Thur Negt
05/30 Illinois Fin Auth -Ref -A IL 134.24 N Goldman Sachs & Company Wed Negt
05/30 Pima Co -Ref AZ 125.53 N RBC Capital Markets Llc Wed Negt
05/30 Mcallister Acad Vlg AZ 119.40 N JP Morgan Securities Llc Wed Negt
05/30 Oakland Univ Brd Trustees MI 114.13 N Citigroup Global Mkts Inc Thur Negt
05/30 Dauphin Cnty Gen Auth -A PA 100.00 N Morgan Stanley & Co Llc Wed Negt
05/30 North Orange Co Ccd - A CA 100.00 N Morgan Stanley & Co Llc Thur Negt
05/30 San Diego Co Wtr Auth -A CA 98.55 N Citigroup Global Mkts Inc Thur Negt
05/30 Payne Co Eco Dev Auth -A OK 89.49 N Bc Ziegler & Co Thur Negt
05/30 El Paso -Rev Ctfs Oblg TX 84.21 N Citigroup Global Mkts Inc Thur Negt
05/30 White River Sd #416 WA 81.55 N Da Davidson & Co Wed Negt
05/30 Spring Isd-Ref TX 78.00 N Wells Fargo Bank Na Day/Day Negt
05/30 Ky Eco Dev Fin Auth -A KY 64.47 N Bc Ziegler & Co Day/Day Negt
05/30 Maine Hlth & Hgr Edu Facs ME 62.48 N Goldman Sachs & Company Day/Day Negt
05/30 Cook Co Cmnty Hsd #212 -C IL 61.52 N Robert W. Baird & Co Inc Wed Negt
05/30 Port Gtr Cincinnati Dev OH 57.32 T Hilltop Securities Inc Tue Negt
05/30 West Palm Beach -A -Txbl FL 50.32 T Morgan Stanley & Co Llc Day/Day Negt
05/30 Perry Twp Multi-Sch Bldg IN 50.00 N City Securities Corp Thur Negt
05/30 Forsyth Cnty Dev Auth-A-1 GA 41.75 N Bb&T Capital Markets Day/Day Negt
05/30 Vancouver Port -Ref -Txbl WA 40.00 T Keybanc Capital Markets Day/Day Negt
05/30 Palmdale Cmnty Redev - Su CA 40.00 N Citigroup Global Mkts Inc Wed Negt
05/30 Capital Region Arpt Comm VA 38.35 N Raymond James & Assocs Wed Negt
05/30 Fl Heffa Rollins Clg FL 38.00 George K Baum & Co Wed Negt
05/30 Taylor Isd -Ref TX 33.54 N Robert W. Baird & Co Inc Thur Negt
05/30 Jenison Pub Schs -Ref MI 32.12 N Stifel Nicolaus & Co Inc Tue Negt
05/30 Wichita Hlthcr -Ii-A KS 31.98 N Bc Ziegler & Co Day/Day Negt
05/30 San Benito Cons Isd -Ref TX 31.82 N Estrada Hinojosa & Co Inc Day/Day Negt
05/30 Georgia Muni Assoc-Cops GA 31.61 N Jefferies Llc Wed Negt
05/30 Adrian Sd MI 30.78 N Stifel Nicolaus & Co Inc Wed Negt
05/30 Pima Co Indl Dev Auth-Ref AZ 30.69 N Bb&T Capital Markets Wed Negt
06/01 11:00 Commonwealth Of Pa -Ref PA 635.55 N Comp
06/01 11:00 Commonwealth Of Pa PA 355.00 N Comp
05/31 11:00 Moore Co -Ref NC 46.09 N Comp
06/02 11:00 Upper Occoquan Sew Auth-B VA 40.93 N Comp
06/02 12:00 Lane Co Sd # 4J OR 37.09 N Comp
TWEET OF THE DAY BY JOE MYSAK, BLOOMBERG BRIEF
May 31, 2016 Bloomberg Brief Municipal Market 8
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
Hartford's New Stadium Piles Up Cost Overruns
katherine gregg@kathyprojo
Goats. m.providencejournal.com/news/20160529/…Details
The State House Bureau Chief for the Providence Journal tweets a link to the paper's coverage of cost overruns at Hartford, Connecticut's minor league baseball stadium: "One thing is clear, though — when all is said and done, taxpayers in Hartford will end up paying more for the fiasco than they counted on.''
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