The "free" updates at this site stopped because we want to focus on a change that will benefit existing subscribers. Existing subscribers will get an update soon.
(Jan. 19, 2012) -- January hasn’t exactly started with a bang in terms of new issuance of municipal bonds, though that isn’t unusual for market. We are re-starting our weekly previews a bit early for next week just to highlight a deal or two.
(Jan. 19, 2012) -- Uncertainty over implementation of the phase-out of California’s redevelopment agencies prompted Moody’s Investors Service to downgrade $11.6 billion of tax allocation bonds by one notch this week. The downgrade applies to TABs in California that are rated Baa2 and above.
(Jan. 19, 2012) -- Governor Jerry Brown’s State of the State speech didn’t provide much added detail on what will be another difficult budget year. He will push for voter approval of temporary higher taxes on sales and wealthier taxpayers. Oh, he still wants the bond-funded bullet train.
(Jan. 13, 2012) -- The good old-fashioned January rally is back in the municipal bond market. Certain “generic” tax-exempt yields as measured by indices fell to 1967 levels this week. We haven’t provided updates during the first couple weeks of the year because of hopes a somewhat revamped Web site would be up and running. That is going to take a couple more weeks, so next week we will simply resume updates in the current format until the changes are ready to go.
(Jan. 4, 2012) -- This is a somewhat quieter week in the market. A regular number of updates will begin again during the week of January 9th. It should be noted that year-end statistics are in for 2011. New sales of municipal bonds dropped in 2011 to the lowest level since 2001.
(Dec. 29, 2011) -- In an interruption of a holiday week in which we planned almost no posts, there is some big news. The California Supreme Court on Thursday (December 29) upheld the state’s law that abolished redevelopment agencies.
(Dec. 23, 2011) -- It was a few nights before Christmas and all through the municipal bond market there was one sound: Traders, investors, and investment bankers closing doors so they could take end-of-the-year vacations. Tax-exempt rates were virtually unchanged this week as the market began its short hibernation period for the traditional year-end break.
(Dec. 23, 2011) -- There is still something to be said for having bond insurance on certain municipal deals, especially if the “underlying” rating falls from A-minus to single-B in one big downgrade. That is what happened this week to certificates of participation sold on behalf of the Foresthill Public Utility District.
(Dec. 20, 2011) -- Moody’s Investors Service has downgraded National Public Finance Guarantee Corp. to Baa2 from Baa1. The outlook has been changed to “negative” from “developing.” National Public Finance was formed by MBIA Inc., the parent company, to shield the public finance exposure of the company from other riskier securities.
(Dec. 20, 2011) -- We didn’t run our usual preview of this week’s planned bond sales because the calendar is so light ahead of the Christmas to New Year’s Day break.
(Dec. 16, 2011) -- The municipal bond market is already getting into the end-of-the-year slowdown, even before the traditional quiet time from Christmas to New Year’s Day. New-issue activity in California dropped off this week and next week won’t see much activity either.
(Dec. 16, 2011) -- A few months ago we mentioned that the troubled City of Bell was looking at ways to address its general obligation bonds. This week the city decided on a course of action for a general obligation bond “workout” plan. The term “workout” can scare bond investors because it might imply some sort of changes to payments. In this case, however, the “workout” refers to the fact that Bell wants to avoid large tax increases to cover future G.O. bond payments.
(Dec. 16, 2011) -- Municipal bond funds saw “inflows” of $460 million in the week ended December 14, according to Lipper FMI.
(Dec. 14, 2011) -- Moody’s Investors Service has withdrawn certain ratings for the Vallejo Unified School District, citing insufficient financial information.
(Dec. 14, 2011) -- As expected, California Governor Jerry Brown announced mid-year budget cuts after revenue didn’t meet projections.Higher-than-expected revenue in November probably helped the state avoid even deeper cuts.
(Dec. 12, 2011) -- California’s bond market doesn’t seem poised to see many new bond sales this week, at least compared with a post-Thanksgiving jump. Today (December 12) will see a benchmark deal of sorts, as Pasadena takes competitive bids on a $26 million water revenue refunding bond.
(Dec. 9, 2011) -- Tax-exempt municipal bonds posted another decent week as rates on some generic measurements fell to levels last seen almost three months ago. Yields on decent quality, longer-term general obligation bonds dropped as much as two-tenths of a percentage point this week. The attractive rates continue to spur refinancing of older bonds; few issuers could keep up with one triple-A school district, though, as it brought a refunding this week that yielded only 2.06% in 10 years. Our weekly summary offers several rating and yield examples.
(Dec. 7, 2011) -- Considering that the City of Vernon recently had to fend off legislation seeking its disincorporation, a one-notch downgrade for its electric system revenue bonds probably doesn’t seem a big deal. Moody’s Investors Service downgraded Vernon’s more than $400 million of existing electric bonds to Baa1 from A3.
(Dec. 7, 2011) -- Mill Valley’s preliminary official statement for a $4 million certificate of participation sale (Community Center Refinancing Projects) caught our attention a few days ago. Why? Well, in addition to the high AA+ Standard & Poor’s underlying rating for the COPs, the deal also included bond insurance from Assured Guaranty Municipal. The deal was priced yesterday.
(Dec. 6, 2011) -- An interesting note on recent volume figures in the municipal bond market. After compiling November sales, California (the state and all its local issuers) dropped to second among all U.S. states for muni sales so far in 2011.
(Dec. 6, 2011) -- Last May the Golden State Tobacco Securitization Corp. said it would probably have to use certain reserve funds for municipal tobacco settlement bonds to cover interest payments on December 1, 2011. We forgot to mention there were disclosure documents last week confirming that these reserve draws did indeed occur. Keep your bonds straight, though. Our summary provides details on which bonds are affected, and why they have varying security.
(Dec. 5, 2011) -- The new-issue sales calendar for the week of December 5th includes one larger sale and a mix of smaller deals, at least so far. The Sutter Health $355 million revenue bond sale we mentioned the other day should price this week.
(Dec. 5, 2011) -- Our weekly summary was abbreviated the other day. Here are a few other yield examples from recent bond sales. For example, Mount Diablo Unified School District general obligation refunding bonds (Aa3) yielded 1.60% in five years and 2.87% in 10 years.
(Dec. 2, 2011) -- The municipal bond market handled the post-Thanksgiving jump in new deals relatively well this week. Tax-exempt rates generally rose a small amount. Our weekly summary is here.
(Dec. 1, 2011) -- Assured Guaranty Municipal Corp. and Assured Guaranty Corp., the main active players in municipal bond insurance, kept their double-A ratings after a downgrade from Standard & Poor’s. Both companies fell two notches, to AA-minus from AA+. The downgrade late yesterday had been widely expected.
(Dec. 1, 2011) -- The parade of nonprofit health systems taking advantage of low tax-exempt rates will continue into December. Sutter Health expects to sell $355 million of tax-exempt bonds, with the biggest chunk of them being issued through the California Health Facilities Financing Authority.
(Dec. 1, 2011) -- Under new stricter criteria for bond insurers, Standard & Poor’s has affirmed the BBB rating for National Public Finance Guarantee Corp., or NPFG. This company was set up as a new subsidiary of MBIA Corp. to shield the safer municipal bond portfolio from MBIA’s riskier exposure. Some banks sued over MBIA’s creation of National Public Finance. If settlement negotiations end the litigation, NPFG's rating might rise to single-A, S&P said.
(Nov. 30, 2011) -- An upcoming California Supreme Court decision on new laws affecting redevelopment agencies might not impact most of the tax allocation bonds graded by Fitch Ratings. “If upheld, the legislation could have a significant impact on the future of redevelopment in California, but Fitch Ratings does not believe it will affect most of its ratings on tax allocation bonds."
(Nov. 30, 2011) -- Here we go again. This week’s bankruptcy filing by AMR Corp., the parent of American Airlines, brings back memories of the United Airlines case. Tax-exempt bonds have been sold on behalf of airlines to finance so-called special facilities and other improvements. American Airlines backs municipal bonds at Los Angeles International Airport, among other places.
(Nov. 29, 2011) -- The Wall Street Journal said several banks are in talks with MBIA Inc. to settle a legal dispute arising from big losses during the financial crisis. The banks objected to MBIA’s subsequent strategy of setting up a new company that shielded municipal bonds from the riskier securities with big losses.
(Nov. 29, 2011) -- The Southern California Logistics Airport Authority said in a disclosure document last week that debt service reserve funds will be used to help cover $10.6 million of debt service payments coming due on December 1 on seven separate non-housing tax allocation bonds. The authority cited the uncertainty surrounding a California Supreme Court decision on new redevelopment laws.
(Nov. 29, 2011) -- A couple apartment projects saw their municipal bonds downgraded by Standard & Poor’s in recent days. Certain apartment buildings have been funded by tax-exempt bonds when a set percentage of units were set aside for lower-income residents.
(Nov. 23, 2011) -- Our item below links to the weekly summary for a Thanksgiving-shortened week. For investors wanting to put money to work after the Thanksgiving break, several opportunities will loom during the week of November 28th, including a handful of deals with single-A ratings.
(Nov. 23, 2011) -- A short week ahead of the Thanksgiving break saw tax-exempt yields stay steady or drop a bit. We’re publishing our weekly summary early on Wednesday because the biggest new-issue pricing is wrapped up for the state’s public works deal.
(Nov. 23, 2011) -- The City of Benicia's 2002 water revenue refunding bonds have been downgraded two notches, to A+ from AA, by Standard & Poor's. Benicia's decreased debt service coverage during the last three years for the 2002 bonds prompted the downgrade.
(Nov. 23, 2011) -- Radian Asset Assurance Inc., which insures certain municipal bonds, had its Ba1 financial strength rating put on review for possible downgrade by Moody's Investors Service.
(Nov. 22, 2011) -- The California State Public Works Board yesterday finished the pricing on $296 million lease revenue bonds. Backing from the higher-rated University of California made a difference in the yield, compared with recent lower-rated sales by the Public Works Board.
(Nov. 22, 2011) -- We didn’t mention it in the item below, but San Jose Redevelopment Agency housing tax allocation bonds remained at single-A from Standard & Poor’s and have a “stable” outlook. The housing bonds need to be kept separate from the non-housing TABs, which were downgraded yesterday.
(Nov. 21, 2011) -- San Jose Redevelopment Agency non-housing tax allocation bonds saw another downgrade as Standard & Poor’s today cut the senior debt to BBB from BBB+. “The rating change reflects our view of the tighter maximum annual debt service coverage, as a result of assessed value declines in the past few years,” S&P said.
(Nov. 19, 2011) -- The short week because of Thanksgiving will still feature a relatively big new municipal bond sale. The California State Public Works Board will wrap up a lease revenue bond sale of almost $300 million for the University of California
(Nov. 19, 2011) -- The underlying rating on Soledad Community Healthcare District general obligation bonds has been cut to single-B, a six-notch downgrade from BBB, according to Standard & Poor’s.
(Nov. 18, 2011) -- Certain bonds tied to the City of Hercules have been taken off a list for possible downgrade by Standard & Poor’s. However, S&P noted that the city still faces budget struggles and has a “negative” outlook on the debt.
(Nov. 18, 2011) -- This week we have mentioned that California is falling short of its revenue forecasts, a development that increases the odds of a mid-year budget cut. Any necessary cuts will be announced in mid-December and go into effect in February 2012. What will be the implications of the cuts for municipal bond issuers?
(Nov. 18, 2011) -- Recently on our calendar, we added a $55 million tax-exempt revenue bond sale on behalf of Emerson College. The California Municipal Finance Authority is the issuer. This is one of those bond sales that needs a bit more explanation, especially if you haven't heard of the college.
(Nov. 18, 2011) -- The Europe debt crisis continues to hover in the background as a factor affecting U.S. fixed-income markets. U.S. Treasury bonds have benefited from the concern as a safe haven. This week the 10-year and 30-year Treasury yields dropped. Tax-exempt bonds generally moved in the opposite direction, with yields rising a bit. In the new-issue market, California saw a good mix of new municipal bond sales even if some of the deals were small in size. New pricings will drop off next week as Thanksgiving nears.
(Nov. 18, 2011) -- It is worth noting that municipal bond funds have now seen six straight weeks of “inflows.” In the week ended November 16, inflows totaled a half-billion dollars.
(Nov. 17, 2011) -- California’s nonpartisan Legislative Analyst’s Office this week reminded lawmakers and everyone else that the state still has quite a budget mess, even if progress was made this year. The governor and lawmakers need to address a $13 billion gap as they work on a new budget in the early months of 2012.
(Nov. 17, 2011) -- The City of Montebello received plenty of publicity earlier this year over budget problems. Montebello has since addressed several issues. In another sign of progress, Standard & Poor’s has taken the city’s redevelopment tax allocation bonds off a list for possible downgrade. S&P affirmed the TAB ratings. We also provide a belated update on the result of Montebello’s tax and revenue anticipation note sale.
(Nov. 16, 2011) -- The main active players for insuring municipal bonds, Assured Guaranty Municipal and to a lesser extent Assured Guaranty Corp., might not participate in some states because of concern over local bankruptcy filings. The Jefferson County, Alabama, bankruptcy filing and one in Harrisburg, Pennsylvania, raise questions about whether states need more say in the process, according to the bond insurer.
(Nov. 15, 2011) -- Another single-A nonprofit health issuer is lining up a tax-exempt bond sale, following a recent stretch in which we saw one or two such deals every week. Cedars-Sinai Medical Center plans a $148 million revenue bond sale; Moody’s Investors Service changed the outlook to “positive” from “stable."
(Nov. 15, 2011) -- Moody’s Investors Service noted earlier this month that some of the largest states recorded less-than-expected tax receipts in the first quarter of the new fiscal year, which began July 1. The State of California, listed as one of the laggards in the report, didn’t see any improvement in October either, according to a controller’s report.
(Nov. 15, 2011) -- When 2011 dawned, the Chicken Littles predicting financial chaos for municipal bonds included expiring letters of credit for variable-rate debt as a big concern. U.S. public finance issuers have silenced the skeptics. They have found solutions during the first three quarters of 2011 for all the expiring letters of credit and liquidity facilities supporting variable-rate bonds, at least based on deals rated by Moody’s.
(Nov. 14, 2011) -- Two issuers outside the U.S. borders that can sell tax-exempt bonds will add some diversity to this week’s expected new municipal debt sales. However, our preview also lists plenty of California issuers.
(Nov. 14, 2011) -- The City of San Jose’s $1.2 billion of senior airport revenue bonds were downgraded to A-minus from A by Standard & Poor’s. The downgrade occurred ahead of a planned tax-exempt and taxable offering of San Jose airport bonds.
(Nov. 10, 2011) -- For the second straight week, we’re posting our summary of new-issue activity a day early. This time, however, it is because of the holiday-shortened week. Veterans Day is marked on Friday. The story driving rates so far this week is once again coming out of Europe, with Italy’s financial problems in the spotlight. U.S. Treasury bond yields dropped as investors favored safer securities; the rally also helped municipal bonds and tax-exempt rates followed lower on Wednesday. San Francisco led California’s new-issue activity this week with a $336 million general obligation bond refunding.
(Nov. 9, 2011) -- Last week we mentioned that Guam was bringing a single-A deal for a change, thanks to the dedicated tax backing the bonds. Another non-U.S. state that can sell tax-exempt bonds (Puerto Rico) also will be in the market this month with bonds rated higher than its general obligation debt.
(Nov. 9, 2011) -- Moody’s now considers the City of Stockton a triple-B credit, no matter what rating you ponder. Moody’s lists as a strength the fact that the city’s staff and council are committed to achieving structural budget balance, Even so, “the downgrade and negative rating outlook reflect the fact that the city’s precarious financial position is being severely challenged by recent events,” Moody’s said.
(Nov. 7, 2011) -- For a change, the upcoming week’s new bond sales calendar doesn’t include a deal from the state. During the week of November 7th, San Francisco will wear the crown of the dominant issuer as the city and county sells $368 million of general obligation refunding bonds.
(Nov. 4, 2011) -- The Government of Guam plans to sell almost $250 million of tax-exempt bonds with a nice twist for investors. The bonds are rated in the single-A category. That might not seem to be such a big deal, given that plenty of local governments get single-A ratings all the time for various debt sales. As we have often noted for Guam, however, its bonds either are rated lower than investment grade or sometimes triple-B with backing from utility revenue or another dedicated source.
(Nov. 4, 2011) -- We published our weekly summary a day early so here is how the municipal market fared through Thursday. Tax-exempt rates on Thursday followed U.S. Treasury securities higher, after news that Greece won’t hold a vote on its budget-deficit plan. We also mention some other yield examples from new deals.
(Nov. 4, 2011) -- City of Santa Ana certificates of participation tied to a 1998 city hall expansion project have been downgraded two notches, to Baa1 from A2, by Moody’s Investors Service. Less than $10 million of the COPs remain outstanding.
(Nov. 4, 2011) -- The San Jose Redevelopment Agency will be able to avoid a default on certain subordinate variable-rate debt this month after a letter-of-credit provider extended its guarantee, which had been scheduled to expire on November 25. We discussed this situation recently. The San Jose agency was in a bind because redevelopment agencies can’t make changes to certain financial arrangements while awaiting a California Supreme Court decision on new state laws affecting the field.
(Nov. 3, 2011) -- The big story in the fixed-income markets this week revolves around Europe and continuing questions about Greece’s debt crisis. This led to a powerful rally on Tuesday in U.S. Treasury securities; tax-exempt bonds also rallied in response. Yields dropped Tuesday, following Treasuries lower. On Wednesday the municipal market didn’t move much. Amid all this broader activity, several new deals in California priced. The California State Public Works Board led the way this week with $497 million of lease-revenue bonds.
(Nov. 3, 2011) -- In the third quarter Moody’s Investors Service said it downgraded more than five municipal bond issues for each one that it upgraded. This is a negative trend that also is being seen at other rating agencies. It isn’t, however, a surprise.
(Nov. 1, 2011) -- Overall municipal bond sales in California continue to lag last year’s pace, with new issuance down about 30% in the first 10 months of 2011 compared with the same period in 2010. However, new sales in the state have picked up, thanks in part to the state’s return to the market after it agreed on a fiscal 2012 budget. Refundings also are keeping the new-issue market vibrant.
(Oct. 31, 2011) -- Certain municipal tobacco bonds have been placed on CreditWatch with negative implications after Standard & Poor’s updated certain criteria for its ratings on such transactions. These bonds are backed by a settlement with certain large tobacco makers and rely on revenue that can change due to trends in cigarette consumption and other factors.
(Oct. 28, 2011) -- Investors will have a choice of higher-yielding and lower-yielding lease revenue bonds in next week’s planned bond sales. The California State Public Works Board plans to offer lease-revenue bonds with A2 and BBB+ ratings. The City of Santa Monica plans to sell about $40 million of lease-revenue bonds with far higher credit ratings (Aa1 and AA+) that are just one notch below triple-A. San Francisco plans to sell more than $90 million certificates of participation with Aa3 and AA-minus ratings.
(Oct. 28, 2011) -- Municipal bond yields didn’t change all that much this week, generally rising a small amount. In contrast, U.S. Treasury bond yields rose roughly one-quarter of a percentage point. Investors could look at some single-A offerings for yield opportunities, primarily in health-related deals.
(Oct. 27, 2011) -- California’s refinancing of some of its deficit bonds, formally known as economic recovery bonds, totaled about $439 million this week. The biggest chunk of the sale matured in 2016 and was priced to yield 0.93%. Dedicated sales tax revenue makes the bonds higher-rated than the state’s own general obligation bonds. Last week California sold G.O. bonds and paid 2.28% in five years.
(Oct. 26, 2011) -- The City of Montebello received a MIG 2 rating from Moody’s Investors Service for a $2.5 million tax and revenue anticipation note sale. We mention a short-term rating for such a small sale because Montebello’s budget problems were highly publicized earlier this year. Since then, Montebello has taken steps to put its house in order.
(Oct. 26, 2011) -- Nonprofit health issuers keep boosting tax-exempt bond supply thanks to a spate of $100 million-plus sales. We’ve mentioned a handful of these sales in recent days. Another looming sale involves the Rady Children’s Hospital.
(Oct. 25, 2011) -- Standard & Poor’s said many of the California redevelopment bonds it rates should continue to do okay, despite state legislation that has cast a cloud over the industry. “Although we recognize the legislation, if upheld, presents possible risks related to restrictions in agency resources and activities as well as the timing of revenue allocation, we do not expect either piece of legislation to affect overall credit quality for the majority of the bonds we rate that have good coverage of existing debt service by pledged revenue and pledged reserves,” S&P said.
(Oct. 24, 2011) -- New issues tied to the State of California continue to take the spotlight each week. This week’s state sale is driven by attractive tax-exempt rates. California plans to refinance older economic recovery bonds with a new $450 million sale. Other sales this week include health-care bonds.
(Oct. 21, 2011) -- Tax-exempt yields dropped this week, ending a recent string of rate increases. Some longer-term general obligation bonds probably dropped close to one-tenth of a percentage point. California’s big general obligation bond sale dominated the new-issue market this week; there were a few other issues, though.
(Oct. 21, 2011) -- Fresno’s credit rating was cut three notches by Moody’s Investors Service this week. We won’t spend much time recounting the reasons because Standard & Poor’s and Fitch Ratings already cut Fresno to a single-A level from double-A.
(Oct. 20, 2011) -- California’s initial retail pricing for this week’s general obligation bond sale struck us as aggressive. By that we simply mean the preliminary yields seemed a bit low. Perhaps the state and its underwriters had hoped demand would be solid since the state hadn’t sold many G.O. bonds this year. The final institutional pricing yesterday showed that the initial yields couldn’t hold.
(Oct. 20, 2011) -- The other day we mentioned a couple healthcare bond sales that are pending. As long as we are mentioning single-A tax-exempt bond sales for health care groups, we also should note an upcoming deal of $110 million for the Fremont-Rideout Health Group.
(Oct. 18, 2011) -- If California’s single-A general obligation bond isn’t offering enough yield for your taste this week, you can always dabble in some tax-exempt healthcare bonds. A couple larger sales have popped up on our radar.
(Oct. 18, 2011) -- California’s initial retail pricing on this week’s general obligation bonds didn’t exactly rally the troops, at least not yet. Roughly one-eighth of the deal was covered by retail orders on Monday.
(Oct. 17, 2011) -- California’s $2 billion general obligation bond sale will take center stage among new issues during the week of October 17. Tax-exempt rates are higher than when the state sold G.O. bonds in September and yields on California’s sale will rise accordingly.
(Oct. 17, 2011) -- Standard & Poor’s said it might downgrade several redevelopment agency bonds with non-investment grade ratings, citing risks from a new California law that could let the state take unencumbered funds that otherwise might help cover debt service.
(Oct. 17, 2011) -- After more than one rating agency red-flagged a recent operating loss at Eisenhower Medical Center, it wasn’t a surprise to see a recent one-notch downgrade by Moody’s Investors Service.
(Oct. 14, 2011) --
Tax-exempt yields rose again this week, though not by a lot. A
handful of weeks ago we griped about high-quality five-year
municipal bonds yielding 0.85% in the new-issue market. The last
few days higher-quality municipal revenue bonds paid closer to
1.50% in five years. However, current tax-exempt rates remain
(Oct. 12, 2011) -- California Governor Jerry Brown signed a bill that has been debated in public finance circles, though the legislation was watered down from past versions. "This bill does not prevent a municipality from declaring bankruptcy or even throw roadblocks in its path," according to Brown. "The goal is to find alternative, less drastic solutions whenever possible."
(Oct. 12, 2011) -- There was good news and bad news for certain Coalinga Redevelopment Agency 2009 redevelopment bonds this week. For Series 2009A and Series 2009B bonds, the “good” news about a downgrade is that it was only one notch; Series 2009C, however, dropped six notches.
(Oct. 10, 2011) -- Our summary of last week’s new bond sales activity didn’t list a handful of other deals and one of them is worth mentioning for a higher-quality benchmark.
(Oct. 10, 2011) -- Last week we noted that Fitch Ratings had issued a rating warning for San Jose Redevelopment Agency merged project area (non-housing) tax allocation bonds. Late Friday Standard & Poor’s also put its BBB+ rating on the bonds on CreditWatch with negative implications over the same issue.
(Oct. 7, 2011) -- A $483 million California State Public Works Board lease-revenue bond sale will get attention in the new-issue market next week. Expect decent yields since all three series are rated BBB+ by Standard & Poor’s and Fitch Ratings. Looking for a higher-rated offering? Los Angeles County Metropolitan Transportation Authority will be pricing $245 million of Proposition A first tier senior sales tax revenue bonds. Standard & Poor’s rates the bonds AAA.
(Oct. 7, 2011) -- Tax-exempt yields jumped this week, making rates a little more palatable to investors. Yields had fallen to ridiculous levels two weeks ago after the Federal Reserve said it would try to push longer-term rates lower. Since then, however, tax-exempt yields have been rising. Make no mistake about it though, this is still an issuer’s market. Among new deals this week, the Ohlone Community College District priced $80 million of general obligation bonds and provided a good sense of yield levels for a decent double-A deal (Aa2 and AA).
(Oct. 7, 2011) -- The other day we mentioned that the State of California is selling general obligation bonds on October 19. The deal has now been tentatively sized at $2 billion.
(Oct. 6, 2011) -- Even though bond insurance plays a much smaller role in public finance than before the financial crisis, some weeks it seems like such guarantees have a bigger foothold. This week, for example, a handful of new issues in California included backing from Assured Guaranty Municipal.
(Oct. 6, 2011) -- The State of California’s new redevelopment law is already having unintended consequences, even as the market awaits an important California Supreme Court ruling in January on the legality of certain provisions. State officials have stressed that the new law, which restricts future redevelopment activity, won’t (and can’t) prevent agencies from meeting payments on existing tax allocation bonds. While that might be the case, that doesn’t mean downgrades can be avoided while the law gets sorted out. Fitch Ratings yesterday said it might downgrade $1.8 billion of San Jose Redevelopment Agency merged project area (non-housing) tax allocation bonds, but the warning wasn’t triggered by something directly tied to these senior bonds.
(Oct. 5, 2011) -- The Palm Drive Health Care District’s past emergence from bankruptcy recently helped boost its credit rating, just not by much. Even though the district continued to meet general obligation bond payments during bankruptcy, the G.O. rating only went up to CC from C from Standard & Poor’s.
(Oct. 4, 2011) -- California is going to sell more general obligation bonds on October 19, according to the state treasurer’s office. Also, recently we noted that the State of California plans to refund some of its economic recovery bonds. The treasurer’s office said the economic recovery bond refunding could be as large as $600 million and is tentatively planned for October 27.
(Oct. 4, 2011) -- The stagnant economy continues to take a toll on areas of the state that once saw growing budgets linked to growth. The City of Fresno is the latest to pay a price; Standard & Poor’s has downgraded its bonds by three notches.
(Oct. 4, 2011) -- Stockton Public Financing Authority 2006A and 2006B revenue bonds (redevelopment projects) have been downgraded to B from BB by Standard & Poor’s. The “adverse” regional real estate market conditions continue to hurt assessed valuations. Keep your bonds straight. The Stockton P.F.A. has sold various bonds with varying credit quality. The ones we mention above specifically refer to redevelopment projects in the title on the Official Statement.
(Oct. 4, 2011) -- The “underlying” rating on Mendocino Coast Health Care District general obligation bonds has been cut two notches, to CC from B-minus, by Standard & Poor’s. The downgrade reflects the district’s “weakened cash and financial position.” An “underlying” rating means that the bonds were guaranteed by a bond insurer.
(Oct. 3, 2011) -- This week’s planned new municipal bond sales in California offer a little for everyone, including a mix of G.O. credits, a double-A health-care credit, and a lower-rated revenue bond.
(Oct. 3, 2011) -- The State of California’s return to the new-issue bond market helped bolster year-to-date volume figures, even though municipal debt sales across the state remain down from 2010. Through September of this year, California issuance is now only down about 33% from the same period in 2010; it was down 40% when the January to August period was calculated. While it certainly helped to have the state back in the market after a budget-related delay, numerous other issuers also flocked to sell refunding bonds to take advantage of low interest rates.
(Oct. 3, 2011) -- We are aware that municipal bond analysts and others have found another proposal aimed at curtailing the value of tax-exemption for municipal bonds. President Obama’s plan for deficit- and debt-reduction proposals includes language that would affect tax-exemption. We should stress right away that this is only a “plan” and its future passage is highly doubtful.
(Sept. 30, 2011) -- Tax-exempt yields followed Treasury rates higher this week, after a powerful rally a week earlier had pushed them lower. The 10-year and 30-year Treasury securities rose roughly a quarter-point this week. Municipal yields rose by less, closer to one-tenth of a full percentage point if that. California’s new-issue municipal market was relatively busy this week, led by a string of refundings to take advantage of current low rates.
(Sept 28, 2011) -- What at first glance might appear to be bad news for bond insurers Assured Guaranty Municipal and Assured Guaranty Corp. also at second glance appears to include some good news. The bad news was a decision by Standard & Poor’s to put the insurers on a watch list for downgrade, meaning their AA+ ratings might drop. The good news is that it now appears the insurers will be able to stay in the double-A rating category, even with new stricter criteria from S&P for bond insurers.
(Sept. 28, 2011) -- Since it is always easiest to gravitate to multi-notch downgrades as the only credit rating change worth mentioning, let’s throw in an upgrade as well. It is only a one-notch upgrade, to A2 from A3, for Children’s Hospital Central California. But the outlook remains “positive” from Moody's Investors Service.
(Sept 27, 2011) -- San Francisco plans next month to sell roughly $400 million of general obligation bonds. Of course, it will be a refunding to refinance existing debt. Refundings continue to be the main driver of new issuance with interest rates so low.
(Sept. 27, 2011) -- Bond insurance, now more of a bit player in municipal finance, still is getting attention from some prospective players. The National League of Cities has once again raised the idea of pursuing a new public finance mutual bond insurance company.
(Sept 26, 2011) -- At least a dozen new bond issues will probably grace California’s municipal bond market this week, driven in part by refinancing opportunities. A surge in volume might be the only thing that helps push tax-exempt yields a little higher; most of the upcoming deals, however, continue to be far smaller than $100 million.
(Sept. 26, 2011) -- The Rosedale-Rio Bravo Water Storage District in Kern County saw its certificate of participation credit rating from S&P drop three notches as it gets ready to sell $16 million of these securities this week.
(Sept. 23, 2011) -- Just when you think yields couldn’t get any longer, along comes “Operation Twist.” That is what some call the Federal Reserve’s plan to buy longer-term U.S. Treasury securities to help keep interest rates lower. The yield on the 30-year Treasury bond plummeted. The Federal Reserve’s plan, in response to concern over “significant downside” risks in the economic outlook, can’t get much credit for this week’s rate drop. The broader concern over a weak economy triggered stock selling and a run into so-called “safer” havens, including Treasuries. The Federal Reserve’s view on the economy had a far bigger impact on investors than a program to buy longer-term Treasuries. Tax-exempt yields followed Treasuries lower, though the move wasn’t as dramatic.
(Sept. 22, 2011) -- The underlying rating on Anaheim Public Financing Authority 2007A-1 and 2007A-2 lease revenue refunding bonds has been cut to BBB+ from single-A by Standard & Poor’s. The downgrade also applies to 2007B taxable bonds. The two-notch cut reflects a decline in revenue tied to lease payments.
(Sept. 21, 2011) -- The Los Angeles Unified School District plans to sell $400 million of general obligation refunding bonds.
(Sept 21, 2011) -- California’s $2.4 billion general obligation bond sale probably said a lot more about market conditions than it did the state’s success at signing an on-time budget this year. Tax-exempt interest rates are stuck at very low levels and that is helping all issuers.
(Sept. 21, 2011) -- Earlier this week Moody’s Investors Service downgraded California Housing Finance Agency home mortgage revenue bonds to Baa from Baa1. This is the latest of a continuing round of downgrades for these bonds and the reasons remain the same.
(Sept. 20, 2011) -- Moody’s Investors Service is continuing to maintain a “negative” outlook on the overall public finance sector, for both local and state governments, because of a weak economy and expectations for less federal funding in the future. These broad sector outlooks don’t mean individual credits will be downgraded; they do mean that general credit quality faces pressure because of various trends.
(Sept 17, 2011) -- The State of California’s big general obligation bond sale dominates the new issue calendar for the week of September 19. In fact, orders from smaller “retail” investors for California’s sale started being taken September 16.
(Sept. 17, 2011) -- California’s $2.5 billion sale of tax-exempt general obligation bonds will get most of the attention next week (the week of September 19 to 23) in the new-issue market. After the state sale concludes, however, a few other issuers are expected to price deals during the week.
(Sept. 16, 2011) -- A surge in new municipal bond sales didn’t push tax-exempt yields much higher this week. Tax-exempt rates were at best a tiny bit higher. Higher-quality issuers continue to benefit from low rates and an issuer’s market, as evidenced by five-year maturities yielding less than 1% tax-exempt. See our weekly summary for details.
(Sept. 17, 2011) -- Municipal bond funds saw the second straight week of “inflows” in the period ended September 14.
(Sept 15, 2011) -- The State of California plans to refund some of its “economic recovery bonds.” The state treasurer’s office hasn’t yet decided on a size or date for the sale. We put these “economic recovery” bonds in quotes above because we call them deficit bonds.
(Sept 15, 2011) -- We have warned for a long time that certain people in Washington D.C. would love to restrict tax-exemption for municipal bonds. President Obama made that very clear in his new jobs bill proposal; he proposed putting a cap on tax-exempt interest for higher-income investors by limiting the value of deductions to a 28% tax rate. We don’t think the proposed change stands a chance of moving forward. That is the good news.
(Sept. 15, 2011) -- The State of California finished its revenue anticipation note sale yesterday as good demand helped place $5.4 billion of debt. The demand appeared solid thanks in part to a state budget with added safeguards, including automatic cuts if revenue doesn’t meet expectations.
(Sept. 15, 2011) -- The Eisenhower Medical Center in Rancho Mirage has received another downgrade warning. Municipal tax-exempt bonds backed by the center are now on Rating Watch Negative by Fitch Ratings.
(Sept. 13, 2011) -- Our preview of this week’s bond sales included the California State University deal for $245 million of systemwide revenue bonds. We also noted that Standard & Poor’s changed its outlook to “positive” from “stable,” but that fact is worth highlighting separately.
(Sept 10, 2011) -- New-issue municipal bond sales will pick up in California during the week of September 12th, thanks to several refunding issues that refinance older higher-cost debt and some new-money deals.
(Sept. 10, 2011) -- Dominic Frederico, the president and chief executive officer of Assured Guaranty Ltd., said this week that Standard & Poor’s ignored several concerns about new criteria that will affect bond insurers’ ratings. Assured Guaranty’s subsidiaries are the main active players left in insuring municipal bonds.
(Sept. 9, 2011) -- Much has been made recently about the yield on the U.S. Treasury 10-year security, specifically focusing on the fact it has hovered around 2.00% and even closed a shade lower (1.99% the other day). The new-issue market in California this week had its own parallel horror story as one high-rated sale offered a five-year maturity at less than 1% tax-exempt (0.85% to be specific). At least the Taxable Equivalent Yield for many buyers is still above 1% but that doesn’t provide much solace. The detail of that pricing is in our weekly summary. In the broader tax-exempt market rates dropped this week.
(Sept. 9, 2011) -- State funding deferrals to help California deal with its own budget issues are affecting localities, including schools. One example of how this can cause a negative impact occurred this week, as the Temecula Valley Unified School District’s general obligation bonds were downgraded one notch to A1 from Aa3 by Moody’s Investors Service.
(Sept 8, 2011) -- We haven’t seen many “competitive” sales recently, where the underwriter is selected based on the best bid on the day of sale. This week, however, there are a handful of such sales in California. One of them provides a decent “benchmark” for the current market, despite being a smaller sale.
(Sept. 8, 2011) -- We noted earlier this summer that the City of Montebello was taking steps to restore fiscal balance. Among other things, it put together a balanced budget with a $1 million reserve. Now the city is poised to sell $3.9 million of short-term notes in September to cover any cash-flow dips in the current year.
(Sept 6, 2011) -- Some of the triple-A deals we mentioned recently will come to market this week in the form of a handful of competitively-bid bond sales.
(Sept 2, 2011) -- California’s return to the new-issue market could include up to $2.6 billion of general obligation bonds, based on an amount listed by the state treasurer’s office. This would include $1.3 billion of new-money bonds. In addition, the state is considering a $1.3 billion G.O. current refunding, subject to market conditions.
(Sept. 2, 2011) -- Assessed value declines prompted a multi-notch downgrade by Standard & Poor’s on Cathedral City Public Financing Authority Merged Project Area tax allocation bonds.
(Sept. 2, 2011) -- Less than six percent of the municipal credits rated by Moody’s Investors Service have seen rating changes after the severe economic downturn. “The vast majority of U.S. public finance ratings have held their ground in the wake of the Great Recession,” Moody’s said.
(Sept. 2, 2011) -- Tax-exempt yields generally rose by a few basis points this week during a lackluster few days prior to the holiday-shortened Labor Day week. In contrast, U.S. Treasury rates declined. It was again a relatively quiet week for new bond issuance and our summary of market activity is intentionally short. Look for longer updates to resume beginning in mid-September, when we expect new sales to pick up.
(Sept. 2, 2011) -- If our memory serves us right, California has landed a top rating from Standard & Poor’s for its revenue anticipation notes for the first time since before the financial crisis and recession hammered the state’s finances.
(Sept. 2, 2011) -- For the sixth straight week, “outflows” hit municipal bond funds. The outflows totaled $282 million in the week ended August 31.
(Sept. 1, 2011) -- Moody’s Investors Service has warned that a multi-notch downgrade of some redevelopment tax allocation bonds in California is possible unless the state’s high court blocks implementation of the new laws affecting this sector. All redevelopment bonds in California rated by Moody’s have been put on review for possible downgrade, making the California Supreme Court’s decision on the legislation a major factor to watch for bondholders.
(Sept 1, 2011) -- We have been noting recently that refunding municipal bond sales, which refinance older debt, are keeping the California new-issue market afloat. Here is concrete proof to back up our anecdotal evidence. In August across the U.S., refunding issuance jumped about 59% over the same month in 2010.
(Aug. 31, 2011) -- There aren’t a lot of triple-A credits in the municipal bond market, but they do pop up from time to time in the new-issue market.
(Aug. 31, 2011) -- The pre-Labor Day lull in the municipal bond market also might affect the post-Labor Day activity for a few days. However, with tax-exempt rates so low, we expect the new-issue market will heat up a bit in September. For example, the Sacramento Municipal Utility District is lining up an electric revenue refunding bond sale.
(Aug. 31, 2011) -- The City of Vernon may have dodged the bullet of disincorporation, but it is still facing a healthy dose of scrutiny. We say “healthy” because taxpayers and bondholders both benefit from reviews that examine the decision making of public entities. State Senator Kevin de León, who helped stop the disincorporation bill, yesterday requested a legislative audit of Vernon’s power utility.
(Aug. 29, 2011) -- The municipal bond market is resting already for the Labor Day weekend, or so it seems. Yesterday’s activity was sluggish in the wake of Hurricane Irene. The San Diego County Water Authority takes the stage with retail and institutional pricing for water revenue refunding bonds. Otherwise the market is set for a slow week. Don’t expect many updates this week. Last week we mentioned some reasons why issuers are staying on the sidelines, even with rates so slow. Some of them also aren’t in a rush because tax-exempt yields might not rise much in coming weeks.
(Aug. 26, 2011) -- The San Diego County Water Authority probably will price more than $90 million of refunding bonds next week (the week of August 29). The bonds are rated Aa2 and AA+. A handful of small school district general obligation bond sales also are on tap next week. A brief preview is here.
(Aug. 26, 2011) -- Tax-exempt yields generally rose across the board this week. The rate rise wasn’t a surprise after a powerful rally drove yields down to levels that sent some investors to the sidelines. The dog days of late August might keep the municipal market a bit stagnant next week, ahead of the holiday-shortened week for Labor Day.
(Aug. 26, 2011) --We haven’t been mentioning the investment trends for municipal bond funds lately, mainly because a sense of equilibrium returned after the funds ended a 29-week period of “outflows” earlier this year. However, there has been a bit of a trend recently, with weekly “outflows” from the municipal funds occurring for five straight weeks.
(Aug. 26, 2011) -- Standard & Poor’s has published its updated criteria for rating bond insurers. What it hasn’t done yet is indicate how this will impact specific existing ratings. “In accordance with our policies and procedures, we will meet with senior management of the bond insurers to review the published criteria and discuss the impact the criteria may have on existing ratings,” S&P said in a release.
(Aug. 25, 2011) -- It is an issuer’s market, so where are all the issuers? Low tax-exempt interest rates are certainly luring some issuers off the sidelines with refunding deals. These deals refinance older, higher-cost bonds, and right now refunding issues seem to make up the bulk of new sales on the horizon. There are several other factors that drive municipal bond issuance and a couple of them might be influencing the current trend toward lower volume.
(Aug. 24, 2011) -- It has been awhile since we flagged any Internal Revenue Service exams of tax-exempt bonds. The City of Vernon has just disclosed that the IRS is reviewing its 2009 Series A electric system bonds. In a release, Vernon said it “believes that the Bonds complied with all applicable provisions of the Internal Revenue Code and the City will cooperate with the IRS in its examination of the Bonds.”
(Aug. 22, 2011) -- This week’s expected new municipal bond sales in California aren’t going to match last week’s volume, based on what we see so far. The San Francisco Airport Commission looks to lead the small pack.
(Aug. 22, 2011) --The State of California is looking at September 20 as the date for an upcoming general obligation bond sale.
(Aug. 22, 2011) -- The Eisenhower Medical Center might face a downgrade from Moody’s Investors Service after unaudited results show an operating loss in fiscal 2011.
(Aug. 17, 2011) -- The State of California is lining up several long-term bond sales that had been delayed until a new budget was in place. Among them, a general obligation bond offering appears likely in coming weeks.
(Aug. 17, 2011) -- The roughly $5 billion California revenue anticipation note sale is planned for the week of September 12. This sale will pay off a bridge loan the state obtained.
(Aug. 16, 2011) -- The California Department of Water Resources is offering its power supply revenue bond sale to smaller “retail” buyers on Tuesday. The tentative tax-exempt yield on the longest maturity, due in 2021, was 2.66% (with a 5% coupon).
(Aug. 15, 2011) -- There is one more new bond sale planned this week that is worth mentioning. The Water Replenishment District of Southern California plans to sell $66 million of revenue certificates of participation. This deal has been our calendar for awhile and is noteworthy for AA+ ratings
(Aug. 13, 2011) -- Add the University of California Board of Regents to the list of new municipal bond sales expected next week (the week of August 15th). Our item below mentioned other expected sales in upcoming days. Now the state treasurer’s office lists August 17 and 18 as the pricing date for $500 million general revenue bonds for the University of California. (Only about half the deal will be tax-exempt; another series will be taxable).
(Aug. 12, 2011) -- Next week’s new municipal bond sales will be dominated by the California Department of Water Resources power supply revenue bond sale of close to $1 billion. The Southern California Public Power Authority plans to sell $159 million of revenue bonds for the Milford Wind Corridor Phase II Project in Utah. Several general obligation refunding bond sales also are planned by local school districts.
(Aug. 12, 2011) -- Standard & Poor’s downgrade of the United States didn’t derail a continuing rally in fixed-income securities. Tax-exempt yields dropped again, down by almost a quarter-point by some measurements through mid-Thursday. U.S. Treasury securities were all over the place in recent days. The Federal Reserve’s pledge to keep rates low for two more years helped support bonds. Low supply of new municipal bond sales continues to be a factor supporting the rally.
(Aug. 12, 2011) -- The California Supreme Court did everyone a favor by agreeing to review the state’s new redevelopment legislation. The court has agreed to review the legislation directly rather than have challenges go through lower courts. The state’s high court will begin hearing arguments in September and a decision is expected by January 2012.
(Aug. 10, 2011) -- An economic slowdown that reduced connection fees is a big factor in a four-notch downgrade of $94 million City of Clovis wastewater revenue bonds, according to Moody’s Investors Service. The rating dropped to Baa2 from A1 late Tuesday.
(Aug. 10, 2011) -- The State of California’s first month in the new fiscal year showed $539 million less revenue than projected for the general fund. “While July’s revenues performed remarkably similar to last year’s, they still did not meet the budget’s projections,” California Controller John Chiang said.
(Aug. 9, 2011) -- Puerto Rico benefited last year from a ratings “recalibration” meant to align municipal bond ratings with “corporate” grades. Now, however, a Moody’s downgrade has put Puerto Rico general obligation bonds back into triple-B territory, matching other rating agencies.
(Aug. 9, 2011) -- As 2011 dawned, the Chicken Littles of the world were clucking about all kinds of alleged “risk” in the municipal bond world. One of their concerns involved whether issuers with variable-rate debt could replace expiring bank “facilities” backing such bonds. This was another tempest in a teapot.
(Aug. 9, 2011) -- The Standard & Poor’s downgrade of the United States to AA+ will indeed affect certain municipal bond ratings. Be careful about overreacting. If anything, the pressure on the U.S. to start showing some real fiscal discipline might be a longer-term plus for investors, despite the short-term impacts of these downgrades.
(Aug. 8, 2011) -- Late last week we mentioned that the California Department of Water Resources is readying a power supply revenue bond sale of as much as $1 billion, with a potential sales date of August 17. It appears that the proceeds will be used to replace a good chunk of the department’s variable-rate debt with fixed-rate bonds.
(Aug. 8, 2011) -- Tax-exempt bond sales by high-grade private universities have always been a good opportunity for diversification. Even prominent names aren’t immune from downgrades, however. Standard & Poor’s has downgraded University of Southern California bonds to AA from AA+ because of a growing debt burden.
(Aug. 5, 2011) -- The California Department of Water Resources appears to be readying a power supply revenue bond sale of as much as $1 billion.
(Aug. 5, 2011) -- There was one overriding story in the fixed-income markets this week, and it had to do with a powerful rally in U.S. Treasury securities that dragged tax-exempt yields lower as well. The 10-year Treasury maturity dropped about one-half of a percentage point over the last week and the 30-year, about three-fifths of a percentage point. Because of the tax-exemption on municipal bonds, muni yields don’t move in exact lockstep with Treasuries. Still, they also staged a powerful rally.
(Aug. 5, 2011) -- We are still waiting to see how the new bond sales calendar shapes up for next week (the week of August 8). A powerful rally in recent days might make some issuers consider refunding bond sales that didn’t make sense at higher rate levels. A $300 million bond sale by the Los Angeles Department of Water and Power looks like it could price as soon as next week. We believe the deal involves water system revenue refunding bonds that were approved by the municipal utility’s board in July.
(Aug. 5, 2011) -- Some investors yanked money out of municipal bond funds at the wrong time in recent days. “Outflows” from the muni funds jumped in the week ended August 3, totaling $861 million, according to Lipper FMI. That is the biggest weekly outflow in more than three months.
(Aug. 4, 2011) -- Lifting the cloud of the federal debt ceiling debate had an immediate impact on tax-exempt bond yields. On Wednesday some general indices dropped one-tenth of a percentage point or more, and rates stand at their lowest level since mid-fall of 2010.
(Aug. 4, 2011) -- The West Contra Costa Unified School District, once the source two decades ago of a much-publicized bankruptcy under its “old” name, has been upgraded to A+ from A by Standard & Poor’s.
(Aug. 3, 2011) -- The City of Fresno’s weakened finances after the recession prompted a three-notch downgrade by Fitch Ratings this week. Lease revenue bonds dropped to A-minus from AA-minus and Fresno’s implied general obligation rating fell to A from AA.
(Aug. 2, 2011) -- The Port of Oakland has received occasional negative attention because of passenger traffic declines at Oakland International Airport. But it got some good news the other day. Standard & Poor’s changed its outlook to “positive” from “stable” on the Port of Oakland’s bonds
(Aug. 1, 2011) -- There aren’t a lot of bond sales on tap for California’s municipal bond market this week unless some refundings come out at the last minute. A quick summary mentions the expected deals.
(Aug. 1, 2011) -- New bond sales by California bond issuers are running 46.7% behind the dollar volume of 2010 so far this year. Long-term bond sales in California totaled almost $18 billion from January through July of 2011, according to Thomson Reuters statistics. That is down from $33.8 billion for the same period last year.
(July 29, 2011) -- The debate over raising the federal debt ceiling, and a looming August 2 deadline to do so, dominated fixed-income chatter this week. Tax-exempt bond yields didn’t change much and the August doldrums seemed to set in prematurely. We provided very few updates on other pages this week because of the “slow” activity. In the new-issue market, two irrigation districts took the spotlight.
(July 29, 2011) -- More than $2 billion of bonds connected with the Sacramento Municipal Utility District were upgraded by Fitch Ratings. The biggest chunk, about $2.1 billion of electric revenue bonds, rose to A+ from A.
(July 29, 2011) -- Moody’s Investors Service yesterday placed 177 public finance credits on a list for potential downgrade due to the possible impact of a downgrade of the United States triple-A rating. The good news? We didn’t see any California issuers on the list.
(July 27, 2011) -- The State of California has obtained a $5.4 billion bridge loan to avoid potential market uncertainty in case a federal debt ceiling impasse continues into August. State Treasurer Bill Lockyer had planned in late August to sell a similar amount of revenue anticipation notes. The interim financing avoids any potential fallout from a continuing debt ceiling impasse.
(July 25, 2011) -- The City of Stockton, much-maligned for its budget woes during the recession and housing decline, might be bottoming out in terms of downgrades. Not long after Moody’s Investors Service downgraded Stockton bonds by two notches, Standard & Poor’s made a one-notch cut late last week.
(July 25, 2011) -- On Saturday morning we updated our yield table to include a sale we forgot to put in our weekly summary. It was large enough, at $125 million for the tax-exempt portion, to mention here. The Modesto Irrigation District’s electric system revenue bonds were rated A2 and A+.
(July 22, 2011) -- Our preview of next week’s expected new municipal bond sales in California shows a mix of credits. Indeed, investors will get to choose from double-A and single-A credits and even a rare double-B new issue. The variety includes a water authority, irrigation districts, local schools, a county, and a city sale on behalf of a nonprofit hospital.
(July 22, 2011) -- New bond issuance in California was dominated for a change by competitively-bid sales and they are the main focus in our weekly summary. The San Francisco Public Utilities Commission sold water revenue bonds and Los Angeles priced general obligation debt. Both issuers were downgraded a notch recently by Moody’s Investors Service. However, their new bond sales benefited from an issuer’s market.
(July 22, 2011) -- Compton’s City Council earlier this week approved roughly 80 layoffs as part of its plan for a fiscal 2012 budget. That isn’t the end of the story. The city’s labor unions probably will challenge the council’s action on various grounds. A few weeks ago Standard & Poor’s lowered its “underlying” credit rating on City of Compton lease-revenue bonds by three notches because of a recent pattern of deficit spending.
(July 22, 2011) -- Municipal bond funds recorded inflows for the second straight week. Inflows for the week ended July 20 totaled $123 million, following $367 million of inflows a week earlier.
(July 20, 2011) -- The City of Los Angeles doesn’t have to shed any tears over a recent downgrade. Moody’s Investors Service recently lowered the city’s general obligation bonds to Aa3, putting them on the same level as other rating agencies at their AA-minus level. Yesterday the city sold $117 million of G.O. bonds; the 10-year maturity yielded a tax-exempt 2.95%.
(July 20, 2011) -- Don’t expect much clarity on the fate of California’s redevelopment agencies anytime soon. Although the recent budget agreement supposedly killed off local redevelopment efforts, some agencies already are using a state-provided alternative that lets them make bigger payments to other local governments in exchange for staying active. In addition, this week redevelopment supporters filed a lawsuit challenging the state’s action.
(July 19, 2011) -- Moody’s Investors Service has downgraded San Francisco Public Utilities Commission water revenue bonds by one notch, lowering them to Aa3 from Aa2. The downgrade affects this week's new sale and the commission’s existing water revenue bonds (totaling $3.7 billion if the new debt is included). Competitive bids from underwriters will be taken this Thursday, July 21, on a new SFPUC bond sale.
(July 19, 2011) -- S&P has suspended the “underlying” ratings on Vallejo City Unified School District general obligation bonds and certificates of participation. The suspension was “due to the lack of current audited financial information, including fiscals 2009 and 2010,” S&P said.
(July 15, 2011) -- Competitively-bid sales will take the spotlight during the week of July 18th in California’s municipal bond market. In these sales, underwriters are selected on the day of the offering after submitting competitive bids. The San Francisco Public Utilities Commission is selling roughly $700 million of water revenue bonds. The City of Los Angeles also is planning two competitively-bid sales next week. Clicking on the link above takes you to a summary of other planned sales.
(July 15, 2011) -- Tax-exempt bond yields dropped by a decent margin this week, driven by certain market conditions and declining U.S. Treasury rates. By some generic measurements municipal bond yields dropped one-tenth of a percentage point, though as usual that impact varied by maturity, credit rating, and type of security. This week’s biggest sale among fixed-rate bonds came from the City of San Jose, with $236 million of revenue debt for its airport.
(July 15, 2011) -- We noticed the other week from a rating assignment that a double-B new bond sale was pending. That isn’t something you see every week. The City of Ventura is selling $346 million of revenue bonds on behalf of Community Memorial Health System.
(July 15, 2011) -- Municipal bond funds recorded inflows for the fourth week out of the last six weeks, according to Lipper FMI statistics. Inflows for the week ended July 13 totaled $367 million.
(July 13, 2011) -- The inability of Los Angeles to bring its employee costs into line with revenue means bondholders took it on the chin again. Moody’s Investors Service downgraded Los Angeles general obligation bonds to Aa3 from Aa2. The downgrade affects $3.3 billion of city debt, including upcoming G.O. bond sales next week.
(July 12, 2011) -- California’s general fund revenue in June was $440.5 million higher than projected, the state controller’s office said. The newly enacted budget counted on $1.2 billion of added revenue in May and June. The actual number was $849 million of added revenue for those two months.
(July 11, 2011) -- Moody’s Investors Service initially published an incorrect rating on this downgrade mentioned July 11. Moody’s has since issued a correction. Moody’s has downgraded the Los Angeles County Metropolitan Transportation Authority’s $1.2 billion of Proposition C Sales Tax Revenue Bonds to Aa3 from Aa2.
(July 11, 2011) -- So far, at least, this week is shaping up as a slower one for new issuance in terms of dollar volume, including a few smaller school bonds. An airport bond sale and a water authority deal will add some variety.
(July 11, 2011) -- We previously mentioned that the City of Los Angeles will be selling general obligation bonds in July. The deal is expected to sell July 19 and July 21 through competitive bids from underwriters. The Modesto Irrigation District also soon will sell $110 million of tax-exempt electric system refunding revenue bonds. Among other deals that might price in coming weeks, the Turlock Irrigation District board of directors will vote July 12 on an agenda item authorizing up to $230 million of first priority subordinated lien revenue refunding bonds.
(July 11, 2011) -- Public finance downgrades exceeded upgrades by about a three-to-one margin in the April to June 2011 period, Moody’s Investors Service said. That is the 10th straight quarter downgrades exceeded upgrades.
(July 11, 2011) -- We mention this one-notch rating change only because of the dollar-volume of bonds affected. Moody’s Investors Service has downgraded the Los Angeles County Metropolitan Transportation Authority’s $1.2 billion of Proposition C Sales Tax Revenue Bonds and $166 million of General Revenue Bonds to A1 from Aa3.
(July 8, 2011) -- Even though it was a holiday-shortened week, a few new municipal bond deals priced. Most of them were in the double-A rating category. Tax-exempt bond yields rose again this week by a few basis points, at least on longer maturities. Some traders say the market is fighting a bout of indigestion as dealers find it harder to move inventory after yields plunged in recent weeks.
(July 7, 2011) -- The outlook on bonds tied to the State of California is now “stable” instead of “negative” after the recent budget agreement helped eat into a structural deficit, Standard & Poor’s said.
(July 7, 2011) -- Tax-exempt bonds backed by private nonprofit Woodbury University have been downgraded to below investment grade by Standard & Poor’s. The rating is now BB+, down one notch from BBB-minus.
(July 7, 2011) -- We aren’t putting many updates up this week since it is a slow period in the days after July 4th. The San Diego Community College District did price for “retail” investors its sale of about $370 million of general obligation bonds.
(July 5, 2011) -- New issuance might slow a bit in the days after the July 4th holiday. Still, a few sales loom and they are in the double-A rating category. One sale in particular will dominate the California market. The San Diego Community College District expects to price $350 million of general obligation bonds.
(July 5, 2011) -- We mentioned the other day that the San Francisco Public Utilities Commission is lining up a big bond sale. The authorized sale is up to $700 million, according to a resolution approved by the Board of Supervisors in June. It appears competitive bids from underwriters could be taken sometime in July.
(July 3, 2011) -- The City of Hercules has been among a few troubled issuers receiving attention for serious budget problems. We previously discussed a consultant’s recommendations that stressed the importance of making redevelopment debt payments. The city in the last week of June did in fact pass a new budget for fiscal 2012, which began on July 1, and debt service payments are covered.
(July 2, 2011) -- The San Francisco Public Utilities Commission could be lining up a sale of more than $700 million in various water revenue bonds, based on a new rating assignment. .
(July 1, 2011) -- You might not know it from some of the new-issue pricings, but tax-exempt bond yields did rise this week. In fact, using some generic measurements, yields on certain maturities probably rose by one-tenth of a full percentage point. A new triple-A bond sale by a California city yielded 4.00% in 20 years. Ouch!
(July 1, 2011) -- For a change, we can mention a multi-notch upgrade. The City of Oakland’s 2004 sewer revenue bonds have been upgraded to AA-minus from A-minus, a three-notch improvement, by Standard & Poor’s.
(July 1, 2011) -- New municipal bond sales in California have dropped by 58% so far in 2011, compared with the same six-month period in 2010, according to statistics tracked by Thomson Reuters. California sales so far in 2011 totaled about $12.7 billion, down from $30 billion a year ago. Across the U.S., municipal bond sales are down by about 44% in 2011 from the same period in 2010.
(July 1, 2011) -- Municipal bond funds recorded inflows for the third week out of the last four weeks, according to Lipper FMI statistics. Inflows for the week ended June 29 totaled $163 million.
(June 30, 2011) -- On June 14 on our General News page we noted that the City of Chowchilla had been presented with a proposed budget for fiscal 2012 that is “structurally balanced.” Chowchilla’s City Council this week approved the fiscal 2012 budget and the city is resuming payments on its 2005 lease revenue bonds after tapping the debt reserve fund for two previous payments.
(June 30, 2011) -- Earlier in June we noted that the San Diego Community College District had approved moving forward on a general obligation bond sale from past election authorizations. A $350 million portion of that new-money sale might price next week, after the July 4th holiday. The debt is rated Aa1 and AA+.
(June 29, 2011) -- California’s new budget will let the state proceed with a revenue anticipation note sale this summer, Treasurer Bill Lockyer said in a letter to state leaders. The state’s RANs can be a more attractive place to park short-term money because California often pays a premium over other issuers’ notes. This year, however, the premium might not be as juicy.
(June 29, 2011) -- Moody’s Investors Service downgraded City of Stockton bonds by two notches, citing continuing budget problems while noting the city’s resolve to address them.
(June 29, 2011) -- San Juan Capistrano certificates of participation for the city’s water system were downgraded three notches, to A from AA, by Standard & Poor’s. As previously noted, a groundwater recovery plant has been operating below capacity and the city also had to make improvements to deal with certain contamination issues.
(June 28, 2011) -- California has a new fiscal 2012 budget, whether or not it is truly balanced. The budget plan also will probably set off a legal fight because the legislature is expected to send bills to Brown that would essentially curtail or end local redevelopment agencies. Prices on California’s general obligation bonds will be driven more in coming months by a scarcity factor because new issuance will remain muted. In addition, investors will be more focused on the fact a budget means the state can sell revenue anticipation notes and avoid the black eye of another cash crunch, IOUs, etc.
(June 28, 2011) -- Want some sort of silver lining in the generally negative news about the state of public budgets? In the first quarter of 2011 four out of five rating actions by Fitch Ratings were “affirmations” of existing grades. Granted, U.S. public finance downgrades outnumbered upgrades for the ninth consecutive quarter in the first quarter of 2011
(June 28, 2011) -- Two merged project area tax allocation bond issues backed by the Desert Hot Springs Redevelopment Agency are now rated B after a three-notch downgrade from BB by Standard & Poor’s. An additional assessed valuation (A.V.) decline in fiscal 2011 prompted the downgrade for Series 2006 and 2008 bonds.
(June 24, 2011) -- Well, we told you the time to be buying was last winter, amid another false panic over municipal bonds. As we observed elsewhere this week, it continues to be an issuer’s market for higher-rated deals. A 10-year tax-exempt yield of 2.90% won't thrill grandma or anyone else. Some deals priced this week yielded more, just not a lot moree.
(June 24, 2011) -- More new bond sales with relatively low tax-exempt yields are expected next week. A $128 million Los Angeles County Sanitation Districts Financing Authority revenue bond sale is rated one notch below triple-A. The issuer will like its borrowing costs, investors not so much. The City of Saratoga plans to take bids on June 29 (Wednesday) on $12 million of general obligation bonds carrying a triple-A rating from S&P. There will also be some lower-rated alternatives in the new-issue market next week.
(June 24, 2011) -- Municipal bond funds recorded inflows for the second week out of the last three weeks. As we noted last week, recent numbers are small enough either way to suggest some sort of temporary equilibrium for the funds.
(June 23, 2011) -- Montebello’s City Council has approved a budget plan that will let the city move forward on pursuing a borrowing designed to avoid a potential cash crunch. The budget and a broader fiscal recovery plan should help ease concern about Montebello’s situation, which had received some well-deserved negative publicity.
(June 23, 2011) -- The Commonwealth of Puerto Rico plans to sell $304 million of public improvement general obligation bonds as soon as next week. Interest on the bonds is tax-exempt from both federal and state income-tax levies, making the debt a diversification possibility for California residents.
(June 23, 2011) -- Still don’t believe it is an issuer’s market, at least for higher-rated deals? Well, sensitive investors need to stay away from the yield scales for this week’s Contra Costa Water District bond sale. One word: Ouch!
(June 22, 2011) -- The City of San Jose’s council agenda this week included authorization for airport revenue bonds of up to $300 million to refund existing commercial paper and also possible refund certain bonds sold in 1998 and 2001.
(June 21, 2011) -- The City of Los Angeles is looking to sell more than $350 million of general obligation bonds in July, including a $125 million sale of new debt for storm water projects. The balance of the sale would refinance existing G.O. bonds. The City Council is considering the proposal on June 21 and no doubt will approve it.
(June 21, 2011) -- While we don’t mention one-notch upgrades or downgrades very often, it didn’t escape our attention at the end of last week when Sacramento County certificates of participation and pension obligation bonds fell to BBB+ from A-minus after a Standard & Poor’s downgrade.
(June 18, 2011) -- Many of the larger bond sales we expect to see priced during the week of June 20th have already been on our Upcoming Sales calendar for some time. Several of them fall in the double-A rating category; one is triple-A.
(June 18, 2011) -- The trustees of the San Diego Community College District at a recent meeting approved moving forward on a general obligation bond sale from two past election authorizations (2002 and 2006). The sale could total about $700 million and will get the attention of conservative investors thanks to a Standard & Poor’s rating of AA+.
(June 18, 2011) -- Looking for an upcoming triple-A bond sale? The City of Saratoga’s council recently approved selling about $12 million of general obligation bonds to refund the city’s existing 2001 G.O. debt (Community Library Project).
(June 17, 2011) -- A $694 million power system bond sale by the Los Angeles Department of Water and Power was the deal in the spotlight this week, especially in a year when $100 million-plus offerings are rare. We have been making the point for some time that investors have to venture into single-A territory to find added income-generating opportunities. A Pomona Unified School District general obligation bond sale shows what we mean.
(June 17, 2011) -- California Governor Jerry Brown did the right thing by vetoing the budget passed by his fellow Democrat legislators this week. The governor would be far wiser to seek a comprehensive plan. In other news for municipal bonds, “outflows” returned for bond funds.
(June 16, 2011) -- The Los Angeles Department of Water and Power tentatively priced its power system revenue bonds for retail buyers the other day. The State of Utah also priced its triple-A general obligation bonds. Californians pay a high price if they dabble in the Utah bonds.
(June 16, 2011) -- We often mention “essential-purpose” or “essential-service” bonds as an appropriate purchase for diversification, especially for investors with a conservative bent. We also make the point from time to time that some bonds can be for an “essential” service but also of lower quality, depending on the area they serve. A good example this week shows what we mean. Fitch Ratings has downgraded Sanger Public Financing Authority wastewater treatment lease revenue refunding bonds (Series 2006A) to BBB from BBB+.
(June 16, 2011) -- California general fund revenue through May (for fiscal 2011) is $408 million ahead of revised budget estimates, the state controller’s office said in a new report.
(June 14, 2011) -- The City of Chowchilla has been presented with a proposed budget for fiscal 2012 that is “structurally balanced,” a city agenda item noted this week. This wouldn’t be worth mentioning in some instances, but in Chowchilla’s case it is significant that the city is returning to balance. We are seeking certain debt-related details so we don’t have to go on speculative assumptions on our part. Go here to see our speculative assumptions, and to learn more about Chowchilla’s proposed budget.
(June 14, 2011) -- Oakley Redevelopment Agency 2008 subordinate-lien tax allocation bonds were dropped three notches by Fitch Ratings, to BB from BBB. That is Fitch’s second downgrade in about a month on these bonds
(June 14, 2011) -- Our summaries of this week’s planned municipal bond sales in California don’t mention out-of-state sales. That is because, traditionally, California residents want the benefit of federal and state exemption for interest earned on in-state bonds. We bring all this up because the State of Utah is selling more than $600 million of general obligation bonds this week. They are rated triple-A. But there are trade-offs in buying out-of-state municipal bonds.
(June 13, 2011) -- Even bankrupt cities get little victories. Vallejo’s “underlying” rating on its 1999 certificates of participation now has a “stable” outlook instead of a “negative” outlook from Standard & Poor’s. Of course, the underlying rating is still single-C. The certificates are rated triple-B based on National Public Finance Guarantee Corp. backing.
(June 11, 2011) -- A $675 million power system bond sale by the Los Angeles Department of Water and Power will take center stage for new municipal bonds priced in California during the week of June 13. An interesting bond sale benefiting The Broad museum project also is looming, along with a good mix of other credits.
(June 11, 2011) -- When we prepared our June 10 weekly summary of new-issue bond pricings, we were aware that a handful of deals were pending near the end of the week. Here is a quick update on those issues.
(June 10, 2011) -- Sales of new municipal bonds in California surged this week, at least in comparison with some of the slower weeks in 2011. Issuers are taking advantage of a springtime rally that pushed tax-exempt rates to the lowest levels since last November (at least on higher-quality bonds).
(June 10, 2011) -- The municipal bond “outflow” streak is finally over, based on Lipper FMI weekly statistics. Municipal bond funds saw inflows of $274 million in the week ended June 8, according to Lipper FMI, ending a 29-week streak of outflows.
(June 9, 2011) -- We have a great addition for your summer reading list, except you better read it late this spring. A preliminary official statement is out for a $675 million power system bond sale by the Los Angeles Department of Water and Power. The bonds could price by next week.
(June 9, 2011) -- Voters in Rio Vista this week rejected a proposal to slash water and sewer rates. A 48-page city report on the proposed rate cut had warned that the city would face several challenges if the rates were lowered. For example, the city questioned whether it could meet bond covenants on year 2000 debt issued for Beach sewer system improvements.
(June 9, 2011) -- The verdict is in from Moody’s Investors Service after bondholders approved covenant changes to relieve pressure on San Joaquin Hills Transportation Corridor Agency toll road revenue bonds. Moody’s downgraded the bonds by two notches, to B1 from Ba2, leaving them four notches below investment-grade.
(June 8, 2011) -- We often have made the point, during rougher economic cycles, that “essential-purpose” municipal bonds remain a good investment. One example: water district revenue bonds that often fare well through good and bad times. A couple more new bond sales should price soon from this “essential-purpose” sector, carrying AA+ or even triple-A ratings.
(June 8, 2011) -- Bond insurance still has a certain appeal for some investors, as a new deal priced yesterday through competitive bidding proved. The financial guarantee has to be providing some psychic benefit for investors as a back-up security because, from a rating standpoint, the bonds are Aa3 based on the “underlying” credit and the bond insurer’s financial strength.
(June 8, 2011) -- Due to other matters on our plate, we didn’t mention the other day that California Housing Finance Agency home mortgage revenue bonds were cut to Baa1 from A3 by Moody’s Investors Service. It wasn’t a surprise because of past rating agency warnings about Genworth Mortgage Insurance Corp.,
(June 6, 2011) -- In our preview of this week’s expected bond pricings (item below), we initially included the Santa Monica Redevelopment Agency sale of $41 million tax allocation bonds with AA (S&P) and AA-minus (Fitch) ratings. In fact, the bonds were priced at the end of last week, after we put together our market summary.
(June 6, 2011) -- Though the action didn’t get a lot of attention, the California Assembly last Thursday passed a bill that would make it more difficult for localities to pursue bankruptcy protection. There is plenty of stupidity tied to the bill.
(June 4, 2011) -- A good variety of offerings will come to market in coming days. Most of the new bond sales we expect could price during the week of June 6th have already been mentioned by us before, or at least been on our Upcoming Sales calendar for awhile.
(June 4, 2011) -- We expect that a lot of people have at least heard of Eli Broad because of his extensive philanthropic work. Now municipal bond buyers can sort of tap into Broad’s wealth by purchasing tax-exempt debt tied to one of his projects. The California Infrastructure and Economic Development Bank plans to sell $150 million of tax-exempt bonds to help finance The Broad museum in downtown Los Angeles.
(June 3, 2011) -- Tax-exempt rates were a bit lower this week. The new-issue market for long-term bond sales was somewhat slow this week and a couple smaller sales we thought might price are coming next week instead. The biggest sales in the market are in the short-term side. Tax and revenue anticipation note sales, used by governments to manage cash-flow needs, tend to peak around this time of year.
(June 3, 2011) -- From time to time we note that “conservative” investors are missing the boat if they ignore high-quality tax-exempt bond sales by private colleges. A triple-A issuer (Pomona College) is readying a sale soon. The bad news is that the bond deal will only be $7 million.
(June 3, 2011) -- Municipal bond fund “outflows” were $436 million in the week ended June 1, according to Lipper FMI, up from $296 million of outflows a week earlier. The outflows were $108 million in the week ended May 18 and $95 million in the week ended May 11. This week’s outflows were the largest since the $796 million recorded the first week in May.
(June 2, 2011) -- Attractive interest rates from the standpoint of issuers also are driving municipal bond refundings, much as a homeowner might refinance a higher-cost mortgage. We see the Sacramento City Unified School District is jumping into the market with $110 million of general obligation refunding bonds.
(June 2, 2011) -- Will the Fremont Redevelopment Agency price $138 million of tax allocation bonds to help pay for a new Bay Area Rapid Transit station? We have put the deal back on our calendar because Standard & Poor’s rated the bonds A+ the other day. We couldn’t find in Fremont’s agendas where it had decided to get the deal going again, but for now we will assume it might be on the horizon again.
(June 1, 2011) -- New municipal bond sales by California state and local issuers are still down by about 70% so far this year compared with the same period in 2010. Sales totaled $7.6 billion through the end of May, down from $25.4 billion for January to May, 2010,
(June 1, 2011) -- The Mendocino-Lake Community College District recently received a boost to A+ from Standard & Poor’s. The district plans to sell $37.5 million of new G.O. bonds in June. Now Moody’s Investors Service also has changed its rating, but downward. The college district’s G.O. bonds were lowered to Aa3 from Aa2. Even at the new level, that is a notch higher than S&P’s grade. See Moody's reasoning here.
(June 1, 2011) -- Moody’s Investors Service has affirmed its A1 rating on California general obligation bonds and maintained a “stable” outlook, citing the prospects for a constructive new budget in coming weeks. The rating “incorporates the expectation that the state will pass a budget that does not rely heavily on one-time measures, and that it will do so in time to avoid a cash crisis,” Moody’s said.
(May 31, 2011) -- A handful of new municipal bond issues on the horizon are worth flagging, even if they aren’t expected this week. Among them, the Santa Clara Unified School District has authorized selling $91 million general obligation bonds from a 2004 voter election. The district also approved offering $81 million of G.O. bonds from a 2010 voter authorization. The Imperial Irrigation District has approved selling up to $85 million of electric system refunding bonds.
(May 31, 2011) -- The education community will continue to keep new-issue bond activity afloat this week. There will be at least a few pricings, despite the holiday-shortened week because of Memorial Day. A new redevelopment bond is noteworthy in that it offers double-A credit ratings.
(May 27, 2011) -- Tax-exempt rates didn’t change all that much this week, a pause after a steady decline for several weeks. Tax-exempt yields on higher-quality new bonds are decidedly unattractive after a powerful rally. Or are they? As usual, an “attractive” yield depends on each investor’s goals, time frame, etc.
(May 27, 2011) -- Municipal bond funds can’t quite turn the corner on ending “outflows.“ Municipal bond fund “outflows” were $296 million in the week ended May 25, according to Lipper FMI, up from $108 million of outflows a week earlier.
(May 26, 2011) -- We usually don’t highlight one-notch rating changes in either direction, but on occasion why not mention an upgrade? Standard & Poor’s has just upgraded the City of Oxnard, citing “the city’s willingness to adjust its budgets in response to an adverse revenue environment."
(May 26, 2011) -- Since we mentioned a one-notch upgrade for Oxnard elsewhere, we suppose we should thrown in a one-notch downgrade to make the municipal bond haters happy. Revenue bonds backed by the Loma Linda University Medical Center are now rated Baa3 by Moody’s Investors Service.
(May 25, 2011) -- A community college district that plans to sell $37.5 million of general obligation bonds seemed to get quite a boost this week: a four-notch upgrade on its existing debt, to A+ from BBB by Standard & Poor’s. That got our attention, but with a little checking we realized the upgrade wasn’t quite as dramatic.
(May 25, 2011) -- The State of California’s fiscal and credit prospects are still “clouded,” despite “welcome progress” on its fiscal 2012 budget so far, Fitch Ratings said in a new report. Fitch noted that the May budget revision is a “clear improvement” over past one-time fixes; the new plan would try to address projected structural imbalances and repay internal borrowing.
(May 25, 2011) -- A couple weeks after a bond downgrade, the City of Compton is moving closer to laying off city workers over a budget deficit. Compton’s City Council approved the layoffs at a meeting last night.
(May 23, 2011) -- A highly-rated school district will be in the new-issue market this week with general obligation bonds, along with a school that can boast of good name recognition thanks to the city it serves. A handful of smaller bond sales in the single-A or even triple-B categories will offer higher-yielding alternatives.
(May 23, 2011) -- In our weekly summary on Friday we forgot to mention the results from the Foothill-De Anza Community College District sale of $184 million G.O. bonds. We set the deal aside because it was packed into two longer maturities. It is worth mentioning because Moody’s Investors Service rates the bonds Aaa.
(May 20, 2011) -- It had to end sometime. Thursday, May 19, finally saw tax-exempt yields rise for the first time since mid-April, the first pause in a municipal bond rally that lasted for several weeks. Even so, yields generally are at levels last seen in November 2010, before a series of doom-and-gloom predictions hammered the municipal market. The rally, however, has been somewhat uneven. Higher-quality bonds, especially those at double-A levels and above, have tended to rally more than some lower-rated munis.
(May 20, 2011) -- Municipal bond fund “outflows” remained relatively low in the latest week. Outflows were $108 million in the week ended May 18, according to Lipper FMI. Another fund tracker, the Investment Company Institute, actually showed a small level of “inflows” for municipal bond funds during a week earlier in May.
(May 18, 2011) -- A couple more higher-quality bond offerings are on the horizon. The Metropolitan Water District of Southern California, a key water supplier, plans soon to sell $170 million of water revenue refunding bonds. The South Coast Water District plans to sell triple-A general obligation bonds soon. Unfortunately the bond offering will be very small.
(May 18, 2011) -- The Metropolitan Water District of Southern California lost its triple-A grade from Fitch Ratings on $4.4 billion of water revenue and water revenue refunding bonds. “The downgrade of Metropolitan’s long-term rating reflects its lingering lower financial performance since 2006, albeit still strong, and an evolving water supply and demand environment in the service area,” Fitch said. MWD provides roughly half of Southern California’s water supply, covering six counties with 19 million residents.
(May 17, 2011) -- Ratings and underlying ratings on California Housing Finance Agency bonds issued under its home mortgage revenue bond (HMRB) indenture were cut to BBB from A by Standard & Poor’s. (By the way, keep your bonds straight. The housing agency has various bonds outstanding with assorted security and ratings.)
(May 17, 2011) -- The governing board of the San Joaquin Hills Transportation Corridor Agency was told last week that a proposed debt restructuring plan was approved by bondholders. We had expected that approval was almost certain; such a restructuring wouldn’t be proposed in the first place without a sense the major bondholders would support it.
(May 17, 2011) --A lower deficit estimate and a lower target for new general obligation bond sales are a couple of the items that merit attention in Governor Jerry Brown’s revised budget plan. Brown wants to cut the state’s issuance of general obligation bonds this year. This decline in new supply will probably help keep the state’s “penalty” spread narrower relative to higher-rated municipal bonds than the penalty would be with higher issuance. This spread also will be driven by whether investors see a final budget as a credible way to limit the state’s chronic deficits.
(May 16, 2011) -- California’s new-issue municipal bond market would be a lot worse off if it wasn’t for school and college district sales coming to the rescue. The week of May 16th is a perfect example to illustrate our point. Almost all of the new sales during this week are tied to the education community. By the way, we count at least 10 new deals that could price this week, and a handful more might come out of the woodwork.
(May 13, 2011) -- Yields on municipal bonds dropped for yet another week as a month-long rally continued. You can only attribute this to “light” new-issue supply for so long, though that is certainly an important factor underpinning the rally. Some investors also came to their senses after the temporary “panic” caused by wildly-inaccurate predictions of looming municipal bond defaults. The weekly outflows from municipal bond funds also slowed to the lowest level (below $100 million) since the stampede for the exits began. The City of Arcadia and the Los Gatos Union School District were beneficiaries this week of the hunger for highly-rated new bonds; both of them paid less than 4% tax-exempt on 15-year maturities.
(May 13, 2011) -- Municipal bond funds have now seen weekly “outflows” for half a year. That is the bad news from the funds’ standpoint. The good news is that the “outflows” plunged in the latest period.
(May 12, 2011) -- The City of Montebello seems to have taken a step to deal with part of a loan coming due from its redevelopment agency, one of the items that has brought the city attention over a budget crunch. See the rather involved explanation for more details.
(May 12, 2011) -- One of the stronger community college districts in California plans soon to sell triple-A general obligation bonds. The Foothill-De Anza Community College District, at a May 2 Board of Trustees meeting, approved selling up to $190 million G.O. bonds. Moody’s Investors Service rates the bonds Aaa.
(May 11, 2011) -- It pays to be a highly-rated borrower in the current market. By “pays” we mean the issuer gets an attractive interest rate; investors pay up to buy the bonds. An example was provided yesterday when the City of Arcadia sold $8 million of general obligation bonds with an AA+ rating, one notch below triple-A.
(May 11, 2011) -- Investors looking for higher-rated new bond issues will see an offering one week from today by the Marin Community College District. The district plans to take bids from underwriters on May 18 for $53 million of general obligation bonds.
(May 11, 2011) -- California’s revenue for the current fiscal year through April was almost $5 billion, or 7.1%, above the level for the same period in fiscal 2010, according to a new report by the state controller’s office. Personal income tax collections accounted for much of the improvement, which were up 12.6% (or $4.6 billion) from last year.
(May 10, 2011) -- Standard & Poor’s lowered its “underlying” credit rating on City of Compton lease-revenue bonds by three notches, to BBB-minus from A-minus, because of a recent pattern of deficit spending. Deficits from fiscal 2008 to 2010 were about 20% of the budget for each year, S&P said. As promised yesterday, we have added a longer update on the Compton downgrade. We also mention a less-drastic one-notch downgrade for another city. On another page we note that the San Leandro Unified School District was upgraded to Aa3 from A1 by Moody’s Investors Service, just ahead of a planned general obligation bond sale this week.
(May 9, 2011) -- The City of Bell, most famous now for the exorbitant salaries paid in the past to certain city officials, is doing a massive house cleaning. New members on Bell’s City Council are turning the city upside-down to fix past wrongs and give Bell a fresh start. At this week’s City Council meeting, staffers recommend that the governing board address a handful of issues affecting outstanding bonds.
(May 9, 2011) -- Several new bond sales planned for the week of May 9th carry double-A credit ratings, a threshold that has tended to generate more investor interest in the current market. Issuers ready to go to market also are benefiting from a strong tax-exempt bond rally that has pushed some yields down to levels last seen in late 2010.
(May 9, 2011) -- Our March print edition explained that the April print edition would be mailed very late, maybe even in May, for a very good reason we discussed. In fact the April print edition was just mailed and the regular May print edition will be mailed after Governor Jerry Brown releases his revised budget next week. We also have been hearing that a set of readers never saw the March edition and it now appears the post office lost one sorted bundle. While replacements were sent out to some, our printer needs to run off more March editions to address anyone else affected by the lost bundle. They will be mailed in a handful of days to readers we believe were affected.
(May 9, 2011) -- The Chicken Littles who sounded various alarms over the municipal bond market are getting roasted yet again over another faulty prediction. Last year the alarmists expressed concern that municipal issuers would have trouble renewing bank letters-of-credit that help support billions of dollars of variable-rate tax-exempt debt. In reality, however, issuers are successfully dealing with the expiring bank agreements.
(May 6, 2011) -- The other day Moody’s Investors Service decided to downgrade Montebello’s Series 2000 certificates of participation (original sale amount of $22.9 million) to Ba1 from Baa2. There are some media reports noting the COP downgrade. What they don’t mention is that the Series 2000 COPs also have a financial guarantee from the strongest bond insurer still standing in the municipal market. The other day we also noted that Montebello’s governing body was meeting to hire a financial adviser, FirstSouthwest, and that in fact has occurred.
(May 6, 2011) -- Plunging tax-exempt rates are the biggest story in the municipal bond market. Various indices that track longer-term municipal yields fell close to two-tenths of one percentage point this week. The municipal bond rally that began around mid-April has driven the index measurements lower to yield levels last seen early last December. A steep drop-off in new issuance of tax-exempt bonds is one factor helping boost municipal bonds. Our weekly summary of new-issue sales provides some recent tax-exempt yield examples.
(May 6, 2011) -- Municipal bond funds recorded outflows for the 25th straight week. See the details here.
(May 5, 2011) -- The State of California’s general fund income tax collections are running 5.1% above what was projected in the fiscal 2011 budget for the year ending June 30. That translates into $2.3 billion more income taxes than projected, said an update from the California Legislative Analyst’s Office.
(May 4, 2011) -- A 16-page legislative counsel discussion casts doubt on the constitutionality of part of Governor Jerry Brown’s proposal to take local redevelopment money to help balance the state’s own budget. Brown also has proposed eliminating local redevelopment agencies altogether, a move that didn’t get approval the first time around in a legislative vote earlier this year. “It is our view … that revenues derived from the general ad valorem property tax is constitutionally dedicated for use by local jurisdictions for their own operations or programs,” the Legislative Counsel Bureau said in a memorandum.
(May 4, 2011) -- The City of Montebello, which is struggling with a cash crunch and concerns over possible inaccurate financial accounting in the past, will hear from a financial adviser on potential financing strategies to buy some breathing room. Separately, yesterday Standard & Poor’s said it is reviewing the city’s tax allocation debt (Montebello Hills project area) for possible downgrade while it reviews the redevelopment agency’s “liquidity position.”
(May 4, 2011) -- Moody’s Investors Service said it might downgrade $28 billion of Puerto Rico bonds, citing the “deeply underfunded nature” of the commonwealth’s retirement system as a big culprit. Puerto Rico bonds are held by residents across the U.S., including in California, because interest earned is exempt from state and federal income tax.
(May 4, 2011) -- California’s local school districts will continue to face financial pressure until it is clear how the state will resolve its own budget deficit, Fitch Ratings said in a report. According to Fitch, "escalating credit pressures will lead to further negative actions on California school districts in the near term and that longer term credit stabilization will depend largely on the direction of state support for education."
(May 3, 2011) -- Here is another upcoming sale to add to your potential list of diversification opportunities. Harvey Mudd College, a private college in the Claremont Consortium, plans to sell $15 million of revenue bonds through the California Educational Facilities Authority. Harvey Mudd’s bonds have just been upgraded to Aa3 from A1
(May 3, 2011) -- San Juan Capistrano certificates of participation with a first lien on the city’s net water system revenues have been downgraded three notches, to A from AA, by Fitch Ratings.
(May 2, 2011) -- Local school districts will be the main participants in California’s new-issue municipal bond market this week. However, a few other issuers will provide some variety for revenue or lease-revenue bonds.
(May 2, 2011) -- New municipal bond sales in California remain slow so far in 2011, dropping to $5.4 billion from $19.2 billion in the first four months of 2010, according to statistics compiled by Thomson Reuters. That is a decline of almost 72%. Across the U.S., muni bond sales dropped by 53% in the first four months compared with 2010.
(May 2, 2011) -- A week after Standard & Poor’s issued a similar warning, Moody’s Investors Service said it might downgrade San Joaquin Hills Transportation Corridor Agency toll road revenue bonds. Moody’s currently rates the bonds Ba2, two notches below investment-grade. In April the toll road agency asked bondholders to approve covenant changes designed to help avoid a potential default.
(April 29, 2011) -- New-issue supply remained slow this week but with good variety. An Anaheim electric revenue bond sale took center stage and a smaller San Mateo sewer revenue bond provided another “essential” purpose sale. A local school general obligation bond, a nonprofit healthcare facility deal, and a wastewater revenue sale insured by Assured Guaranty Municipal helped round out the week’s new sales. The tax-exempt market continued a rally that has now lasted 12 business days.
(April 28, 2011) -- A couple upcoming local school district general obligation bond sales provide an interesting contrast in how property values are faring. For “conservative” investors, the Newport-Mesa Unified School District’s $100 million G.O. bond sale is difficult to beat. The bonds, rated one notch below triple-A (Aa1) by Moody’s Investors Service, are backed by a gigantic tax base. The Stockton Unified School District, with a $65 million G.O. bond sale rated four notches lower by Moody’s (A2), has faced a tougher real estate market. We also mention a handful of other pending school district G.O. bond sales with decent credit ratings.
(April 28, 2011) -- The Orange County Performing Arts Center, which does business as the Segerstrom Center for the Arts, is one example of many in the municipal market of the risks of relying on variable-rate bonds. In past years, even when tax-exempt fixed rates were at low levels not seen since the 1960s, many issuers still found it advantageous to sell variable-rate bonds. Then the credit crisis derailed the short-term market. As soon as next week, the Arts Center through California's infrastructure bank plans to price $57 million of fixed-rate tax-exempt bonds to refund its 2008C debt. See why here.
(April 26, 2011) -- Standard & Poor’s said any downgrade on the State of California, if it occurred, would likely be related to a problem with “liquidity” if a fiscal 2012 budget is delayed. The rating agency affirmed the state’s A-minus general obligation bond rating with a “negative” outlook. A "stable" outlook is possible if a timely budget avoids a cash crunch.
(April 25, 2011) -- Standard & Poor’s late Friday put San Joaquin Hills Transportation Corridor Agency toll road revenue bonds on CreditWatch with negative implications after the agency asked bondholders to approve covenant changes designed to help avoid a potential default. S&P currently rates the bonds BB-minus and said it saw "positive and negative aspects" in the agency's proposals. Our view is that the toll road agency probably got a sense from major bondholders that they would support these changes. At this point the already low credit rating isn’t the main issue. The main issue is having the agency find a way to pay off all its bonds in full (and pay off most of them on the scheduled maturity dates, except for a handful of those being asked to provide an extension).
(April 25, 2011) -- Standard & Poor’s said it anticipates publishing “final criteria” for possible changes in the way it rates bond insurers by the third quarter of 2011. We have previously discussed S&P’s proposed criteria changes because there is concern they would lead to a downgrade of Assured Guaranty Corp., the main player still guaranteeing municipal bonds. A summary of comments received by S&P indicated that investors and others were somewhat critical of the rating agency’s proposed changes.
(April 22, 2011) -- A few days ago we noted that Anaheim had approved moving forward on an electric system revenue bond sale of at least $90 million for Anaheim Public Utilities. The bonds could price during the week of April 25, making it the largest deal on tap in coming days. A few other new sales also could price in coming days.
(April 22, 2011) -- Tax-exempt yields declined steadily all week as the municipal bond market continued a rally that began toward the end of last week. We aren’t doing our usual weekly summary because of limited new-issue pricings, but a brief discussion with yield examples is here. Tax-exempt yields are now at the lowest level in about a month, based on certain benchmark indices.
(April 22, 2011) -- The City of Montebello will be audited by the California Controller’s Office because of concern over a failure to submit timely financial reports to the state. In addition, Montebello is under scrutiny after media reports about potential inaccurate financial accounting in the past.
(April 22, 2011) -- Municipal bond funds registered a 23rd straight week of “outflows” in the period ended April 20, according to Lipper FMI. The outflows were $1.2 billion, up from $854 million a week earlier.
(April 21, 2011) -- Standard & Poor’s this week downgraded Hercules Redevelopment Agency Series 2007A and Series 2005 tax allocation bonds (merged project area) to CCC from BB. Three years of “significant drops in assessed value” in the project area backing these bonds is one factor for the low rating.
(April 21, 2011) -- Assured Guaranty Corp. said it is moving toward providing a direct guarantee on municipal bonds that had been formerly insured by CIFG Assurance North America. Why does this matter? Once the novation occurs, Assured Guaranty will request that its current double-A rating be assigned to the bonds as the “insured” rating.
(April 21, 2011) -- City of Oakdale sewer enterprise revenue bonds have been downgraded two notches, to A3 from A1, because of weaker financial performance. Moody’s Investors Service said a rate increase in 2009 probably has stabilized the sewer fund. However, audited financial statements for fiscal 2010 still aren’t available. Oakdale is in Stanislaus County, northeast of Modesto.
(April 20, 2011) -- The drumbeat we have warned about before, the one calling for getting rid of tax-exempt bonds, keeps getting louder. We see another federal legislator is fashioning a proposal to make the municipal bond market entirely dependent on taxable Build America Bonds in the future.
(April 18, 2011) -- A higher-quality sale by San Diego County is one highlight of this week’s upcoming sales calendar. Unfortunately the planned double-A sale is relatively small, a $20 million certificate of participation issue.
(April 18, 2011) -- Moody’s Investors Service has joined the other two major rating agencies in downgrading City of San Jose Redevelopment Agency bonds. Moody’s cited “significant deterioration of debt service coverage levels brought about by contraction” of the assessed valuation within the agency's Merged Project Area.
(April 18, 2011) -- Bond insurer Assured Guaranty Ltd. received a boost with last week’s out-of-court settlement that will pay the insurer $1.1 billion. The settlement represents almost one-third of Assured Guaranty’s non-investment-grade exposure to residential mortgage-backed securities.
(April 18, 2011) -- Certain City of Hercules bonds were downgraded two notches by Standard & Poor’s because of continuing budget pressure. The downgrade reflects the city’s “general fund pledge, subject to appropriation, along with a lack of timely budget adjustments to date that have led to declining reserves and liquidity levels.
(April 15, 2011) -- This week’s new-issue activity in California’s municipal bond market was dominated by a handful of single-A issues. As we noted in our preview of these sales on Monday, “decent” yields are the norm for new single-A deals in the current market. Tax-exempt yields didn’t change much this week following a period of steady increases. U.S. Treasury rates dropped this week.
(April 15, 2011) -- Municipal bond funds registered a 22nd straight week of “outflows” in the period ended April 13, according to Lipper FMI. The outflows were $854 million.
(April 13, 2011) -- The City of Montebello has lost a breath of fresh air in its fight against a budget crisis. Peter Cosentini, the interim city administrator, told the city council he is resigning effective May 12. Cosentini cited concern the city isn’t moving fast enough to deal with budget deficits and a looming cash crunch.
(April 13, 2011) -- San Francisco’s $2.6 billion of municipal bonds were downgraded one notch by Fitch Ratings because of continuing budget pressure. The outlook is now “stable” thanks to “the city’s improving revenue picture," Fitch said.
(April 12, 2011) -- If it seems as though we haven’t been doing as many updates the last three weeks or so, it is partly because of a “quiet” municipal bond market. Investors looking for a higher-quality bond can watch for the Sequoia Union High School District’s $25 million imminent sale of Aa1 general obligation bonds.
(April 11, 2011) -- A couple utility bond sales in the single-A category will provide decent yield opportunities in this week’s new-issue California municipal market. The Government of Guam plans to sell the $86 million of hotel occupancy tax revenue bonds that we flagged a month ago.
(April 11, 2011) -- The State of California’s revenue picture continued to look a bit brighter in March, even though official numbers didn’t reflect the gains.
(April 8, 2011) -- A couple weeks ago we said there might be an “upswing” in supply because quite a few issues had been added to our upcoming sales calendar. Unfortunately the upswing, measured more in number of issues than in dollar volume, has a mirage-like appearance to it. Still, our weekly summary lists a few new sale examples.
(April 8, 2011) -- Municipal bond funds saw higher outflows in the latest weekly period ended April 6, with an increase to about $1.1 billion, according to Lipper FMI. This is the first time they rose above $1 billion in more than a month.
(April 7, 2011) -- The Cathedral City Redevelopment Agency is the latest to join the list of downgraded tax allocation bonds thanks to declining assessed valuation. The senior-lien non-housing TABs of the agency were cut to Baa1 from A2 by Moody’s Investors Service, a two-notch decline.
(April 6, 2011) -- Moody's Investors Service has downgraded non-housing subordinate tax allocation bonds of the Southern California Logistics Airport Authority to B1 from Ba3. That B1 level is four notches below investment-grade.
(April 5, 2011) -- Yes, we know the new-issue market is slow when a planned $35 million bond sale gets mentioned. In any event, the M-S-R Public Power Agency expects to sell the subordinate-lien electric revenue refunding bonds soon to refund certain outstanding debt.
(April 4, 2011) -- General obligation bond sales by local school districts are expected to dominate this week’s new-issue calendar in California. We expect that about $100 million of local G.O. bond sales could price this week, and almost all of the volume is coming from school districts.
(April 4, 2011) -- Our Yield Trends weekly update on Friday didn’t include one pricing from the end of the week, the $10 million sale of tax-exempt general obligation bonds by the Millbrae School District. We mention it briefly here because a few more school districts plan to sell new bonds this week.
(April 1, 2011) -- New municipal bond sales in California plunged during the first quarter of 2011, dropping to $4.3 billion from $16.5 billion in the same quarter of 2010, according to statistics compiled by Thomson Reuters. That is a decline of almost 75%.
(April 1, 2011) -- San Jose’s $107 million sale of special hotel tax revenue bonds took the spotlight this week. Remember the days when $100 million-plus municipal bond sales were commonplace? Not anymore. San Jose offered an interesting contrast this week because the city also sold higher-rated bonds and the yield difference was a full point on five-year maturities. Tax-exempt yields rose this week.
(April 1, 2011) -- Assessed valuation declines continue to be a factor in downgrades of certain redevelopment bonds. The most prominent downgrade this week affected the City of San Jose Redevelopment Agency’s non-housing tax allocation bonds.
(April 1, 2011) -- Bonds backed by the King/Chavez Academy of Excellence, a San Diego nonprofit overseeing certain charter schools, have been downgraded to BB+ from BBB-minus by Standard & Poor’s.
(April 1, 2011) -- Municipal bond fund weekly outflows have now occurred for 20 straight weeks but continue to show signs of settling into a narrower range. In the week ended March 30, for example, the outflows slowed to $404 million, the lowest figure yet given recent trends.
(March 31, 2011) -- As usual, when a city runs into financial stress, there is an unfortunate trend for headlines or comments to pop up with the city’s name and “bankruptcy” in the same breath. This has occurred with the City of Montebello, which certainly faces some tough decisions. We don’t believe, however, that “bankruptcy” is something Montebello faces or needs, despite its financial crunch.
(March 30, 2011) -- Those poor governments. Times are so tough. Right? Well, in the fourth quarter of 2010, they extracted more wealth from the private sector (taxes) than ever before. Hmmmmmm. So what's the problem?
(March 30, 2011) -- Montebello’s interim city administrator called for the city council to arrange a special meeting to discuss the city’s budget problems. The city needs to take immediate action to address its cash situation, and also needs a longer-term recovery plan in place, the administrator said.
(March 30, 2011) -- Sacramento County obligations have been downgraded one notch by Fitch Ratings because of continuing budget problems. The outlook remains “negative,” meaning another downgrade is possible absent corrective action.
(March 29, 2011) -- A U.S. bankruptcy court judge has approved letting Adventist Health System lease the hospital of the bankrupt Sierra Kings Health Care District.
(March 28, 2011) -- San Jose, the nation’s 10th-largest city, takes the spotlight this week with a new issue that will probably offer decent tax-exempt yields. We already mentioned this sale because of the size, $100 million. It used to be that wasn’t such a “big” deal. In the current market, however, we aren’t seeing many deals at or above $100 million. A wastewater authority bond sale and a few school district issues help round out this week’s planned pricings.
(March 25, 2011) -- Tax-exempt bond yields rose this week, in part as municipal bonds followed U.S. Treasury rates higher. California’s new-issue municipal market might be picking up a little more steam in the weeks ahead, based on our calendar. This week’s new-issue bond market offered a mix of diversification opportunities, including general obligations, health facility debt, a university-backed issue, and high-yielding redevelopment tax allocation bonds.
(March 25, 2011) -- Arcata Community Development Agency tax allocation bonds were placed on CreditWatch by Standard & Poor’s with “developing implications.” Since that is a less common CreditWatch action, we decided to mention it. “Developing” means that a rating may be affirmed, raised, or lowered.
(March 25, 2011) -- Bonds tied to Ontario International Airport were lowered one notch by Standard & Poor’s to A-minus from A. S&P cited "a significant decline in passenger volume since 2008.”
(March 25, 2011) -- Municipal bond fund outflows continued for a 19th straight week. However, the level of outflows seems to have settled into a narrower range. To see the latest outflow figure and numbers for recent weeks, visit our brief write-up.
(March 24, 2011) -- An entity connected with, yet also legally separate from, the bankrupt City of Vallejo was in the market this week following a two-notch upgrade. This is a case where an issuer would want to stress that it is not guilty by association with the city’s bankruptcy case. As we note in our lengthy discussion, this Vallejo district stands on its own as a separate credit. We also mention yields on the new sale.
(March 24, 2011) -- New developments indicate Governor Jerry Brown might not get the special election he wanted in June on five-year tax extensions. Time is running out to get that election scheduled, though Brown continues to hold out hope that a handful of Republicans needed to support the special election will still provide votes. A new survey by the Public Policy Institute of California indicates Brown is losing ground on his tax plan. We look at this issue briefly, and remind investors about a reason for IOUs. By the way, the state's yield premium has shrunk in recent weeks.
(March 24, 2011) -- In a tax-exempt bond market starved for new sales, it would seem to be a good thing that the Long Beach Unified School District plans to sell $100 million of general obligation bonds. The bad news? Go here to see the bad news angle (in our view).
(March 23, 2011) -- The Emery Unified School District, which ran into fiscal problems in the 1990s that necessitated a state takeover, took another step toward putting this troubled past behind it. Standard & Poor’s upgraded the district’s general obligation bonds by two notches to A+ from A-.
(March 23, 2011) -- Maybe it seems like we are scraping the bottom of the barrel for yield “benchmark” examples in new-deal pricings, but we picked a smaller deal for a couple reasons. It also produced some of the lowest new-issue yields we have seen in California in about a month.
(March 22, 2011) -- City of Vernon electric system revenue bonds were removed from a list for possible downgrade and affirmed at an A3 grade, Moody’s Investors Service said. However, the outlook is “negative” because of pending state legislation that seeks to disincorporate the city.
(March 22, 2011) -- Some California redevelopment bonds will face continued pressure from assessed valuation declines for awhile, even into fiscal 2013 if not beyond, Fitch Ratings noted in a report. Project areas that were highly leveraged, or where new construction was especially prevalent during the housing boom, are among those vulnerable in coming years
(March 22, 2011) -- A month ago we mentioned that the Fremont Redevelopment Agency may price $138 million of tax allocation bonds to help pay for a new Bay Area Rapid Transit station. However, we finally removed it from our sales calendar.
(March 18, 2011) -- New-issue pricings in California municipal bond market still won’t be anything to write home about during the week of March 21, but at least there is a little more activity to preview.
(March 18, 2011) -- Tax-exempt bond yields dropped this week as market turmoil over the Japanese disasters boosted demand for safer securities. U.S. Treasury bonds benefited the most from the flight to quality, but also dragged tax-exempt yields lower. California’s new-issue municipal market was slow again this week, though Riverside County did sell three tax allocation bond issues.
(March 18, 2011) -- The “outlook” for U.S. states and local governments is negative for a third straight year as they face “unprecedented fiscal strains” amid a slowly improving economy, Moody's Investors Service said. However, their debt burden isn't the issue. “Most governments face a revenue and a spending problem, not a debt problem,” Moody‘s said.
(March 18, 2011) -- Municipal bond fund outflows rose to $569 million in the latest weekly reporting period that ended March 16, according to Lipper FMI,
(March 17, 2011) -- The other day the U.S. Congressional Budget Office came out with its laundry list for options to pare the federal deficit. As usual, the CBO took a shot at tax-exempt bonds, as it always does in these reports. In short, the CBO suggests doing away with tax-exemption altogether.
(March 16, 2011) -- Here is something we used to see all the time and rarely see nowadays. A new municipal bond sale will finally hit $100 million. Hurray!
(March 16, 2011) -- Want to see the latest version of the bill that would do away with California’s local redevelopment agencies? Our discussion provides that link. It is fascinating reading, in a perverse sort of way.
(March 16, 2011) -- California Controller John Chiang released a report the other day noting that the state now faces a $60 billion liability for health and dental benefits for the state’s retirees over the next 30 years. This is going to be an issue for the state’s credit rating if it isn’t addressed one of these days.
(March 15, 2011) -- A Riverside County Redevelopment Agency project area that is the focus of a new deal has been downgraded one notch by Standard & Poor’s. The county’s existing Desert Communities Redevelopment Project Area first lien tax allocation bonds are now rated A-minus instead of A.
(March 15, 2011) -- The City of Benicia has lined up a $13 million certificate of participation sale that will finance solar power components at various city locations. We flag this deal mainly because there will be many more like it in coming years as solar infrastructure gains a bigger following.
(March 15, 2011) -- The Federal Reserve’s recently-released flow of funds report for the fourth quarter of 2010 provides one interesting statistic: Outstanding municipal bonds stand at $2.925 trillion, closing in on the $3 trillion mark.
(March 14, 2011) -- New-issue municipal bond volume in California, which still remains slim, might be led this week by Riverside County Redevelopment Agency deals, including an A-minus offering for its Jurupa Valley project.
(March 14, 2011) -- We noted the other week that is seemed like redevelopment bonds were about the only game in town in California’s new-issue municipal market. The State Treasurer’s Office now says tax allocation bond issuance spiked to $700 million so far this year.
(March 14, 2011) -- The court fight is continuing over a 2009 decision that benefited municipal bondholders by splitting bond insurer MBIA Insurance Corp. The New York State Insurance Department approved the split to shield municipal bond guarantees from riskier securities backed by MBIA. We mention new court documents here.
(March 11, 2011) -- Governor Jerry Brown’s proposal to shift some government services to counties will either be credit neutral or possibly negative, depending on proposed funding for the realignment, Moody’s Investors Service noted. One question mark is whether voters will approve a five-year extension of temporary tax increases.
(March 11, 2011) -- Tax-exempt bond yields barely moved this week after a recent rally that drove rates lower. If anything, yields were slightly higher. California’s new-issue municipal market was slow this week, even as some bigger deals were priced elsewhere in the U.S. See some pricing examples here.
(March 11, 2011) -- Municipal bond fund outflows dropped to about $528 million in the latest weekly reporting period that ended March 9. That was the lowest pace in awhile.
(March 10, 2011) -- Want to know what a triple-A state pays to borrow on municipal bonds? The State of Maryland just sold $485 million of general obligation bonds. You can see some yield comparisons here.
(March 10, 2011) -- The Government of Guam plans to sell municipal bonds with investment-grade ratings thanks to support from a hotel occupancy tax. Interest earned on Guam bonds is exempt from federal and state taxes for California residents and investors elsewhere in the U.S.
(March 9, 2011) -- General obligation bonds supported by the Sierra Kings Health Care District have been upgraded to Baa3 from Ba2 by Moody’s Investors Service after a bankruptcy court gave such debt a strong signal of support.
(March 9, 2011) -- An updated economist forecast says California’s unemployment rate might stay in the double digits until early 2013, another sign the state’s public sector can’t count on a big economic rebound to mend budgets.
(March 9, 2011) -- Recently we wrote about a “non-traditional” purpose for municipal bonds that involves a default. The risk is far different for such munis, and yet these “non-traditional” borrowers are being lumped into some people’s default predictions for the overall municipal market. This week the subordinate debt service reserve fund for the deal we mentioned was drained.
(March 8, 2011) -- A new report by the California State Controller’s Office questioned various practices at redevelopment agencies. It also, as an aside, notes that the Hercules Redevelopment Agency faces stress in meeting bond payments on certain debt issues. The problems in Hercules are spelled out in the redevelopment agency’s recent continuing disclosure annual report and we highlight some of the issues.
(March 8, 2011) -- It is probably illegal now to mention anything “good” about municipal bonds, but we join with the Libyan rebels in fighting the powers that be. We mention a two-notch upgrade but also throw in a separate “negative” outlook change to keep the naysayers happy.
(March 8, 2011) -- In a report with fascinating timing, the California State Controller’s Office found various deficiencies after reviewing practices at 18 local redevelopment agencies. The report, released yesterday, adds fuel to Governor Jerry Brown’s attempt to burn down local redevelopment agencies for good.
(March 7, 2011) -- Have Puerto Rico general obligation bonds been upgraded by Standard & Poor’s? It looks like it, based on information the rating agency released at 11:01 Eastern Standard Time on Sunday night. Puerto Rico’s new G.O. bond sale is rated BBB instead of the old BBB-minus. We are noting this at 5:55 a.m. Pacific Standard Time on Monday morning. (UPDATE: We were right; the upgrade did occur.)
(March 7, 2011) -- Beside the new deals mentioned below (March 4 entry) that could price this week, Puerto Rico also might sell $250 million of general obligation bonds. A private Roman Catholic university also is ready to offer $19 million of tax-exempt bonds.
(March 4, 2011) -- Believe it or not, California’s municipal bond market still includes something other than redevelopment tax allocation bonds. We know that is hard to believe after redevelopment issuers dominated the new-issue market this week. Some of our yield examples from this week’s new-issue activity show how a tax allocation bond is paying two full percentage points more than a deal with somewhat higher credit quality.
(March 4, 2011) -- A joint budget committee in the state Legislature approved Governor Jerry Brown’s budget proposal (with some tinkering). The committee supported his proposal to do away with local redevelopment agencies in the future. Officials representing the League of California Cities said Brown’s redevelopment proposal violates Proposition 22, which was approved by state voters in November to protect local money from state raids.
(March 4, 2011) -- For investors looking for something other than redevelopment bonds, next week’s new-issue market might include a couple deals that have been on our Upcoming Sales calendar for awhile.
(March 4, 2011) -- Municipal bond fund outflows rose to about $1 billion in the latest weekly reporting period that ended March 2, according to Lipper FMI.
(March 3, 2011) -- A “split” rating refers to a situation where rating agencies assign different grades to the same bond. In the case of the Oakland Unified School District, there is a big “split” indeed. The other day Moody’s Investors Service downgraded the Oakland district’s general obligation bonds to A2 from A1. In contrast, Standard & Poor’s in February cut the same district’s bonds to BBB-minus from BBB-plus and withdrew its rating, at least temporarily. These situations can spell opportunity for the sophisticated municipal bond investor.
(March 3, 2011) -- These municipal bond default predictions popping up here and there are deceiving in one respect. We discuss an example here of a “municipal bond” that is facing an event of default, and yet in terms of the borrower most investors wouldn’t see this as a “traditional” municipal bond. Just sayin'.
(March 2, 2011) -- The good news about the latest default prediction for municipal bonds? People are starting to “round down” their estimates. A new default prediction pegs potential muni defaults at almost $100 billion over the next five years. Where will almost $100 billion of municipal bond defaults come from, and how specific does this new report get?
(March 2, 2011) -- Our February print edition took some pains to discuss the current environment for California tax allocation bonds (the headline: “Yield Manna from Heaven? Jerry Brown and Redevelopment Bonds”). As expected, there is now a rush to sell TABs thanks to Governor Jerry Brown’s proposal to all but end future local redevelopment efforts. And, the “yield manna” just keeps falling.
(March 2, 2011) -- The City of Riverside and Riverside County are so concerned about the current yield “premiums” on tax allocation bonds, they are looking at another strategy. They would buy each other’s redevelopment debt at lower borrowing costs, a strategy that would also let them move fast in light of the governor’s redevelopment proposal,
(March 1, 2011) -- Municipal bond sales across the U.S. dropped by almost 41% in February, falling to the lowest level for that month since the year 2000, according to statistics compiled by Thomson Reuters. Municipal bond sales in California totaled about $2.8 billion in February, down 54% from $6.2 billion in the same month a year earlier. The slower pace of sales so far this year has been one factor pushing tax-exempt yields lower in recent weeks.
(March 1, 2011) -- Agencies rushing to sell tax allocation bonds in case the governor succeeds in curtailing local redevelopment might want to make sure they are dotting their “i’s” and crossing their “t’s.” Draft language in the governor’s bill to stop redevelopment also provides a three-year period for reviewing the validity of tax allocation bonds sold on or after Jan. 1, 2011. That compares with a 90-day window for pre-2011 bonds. The three-year window also applies to redevelopment plans adopted or amended after Jan. 1, 2011.
(March 1, 2011) -- The Galt Redevelopment Agency priced new tax allocation bonds the other day and paid a tax-exempt 7.25% on a 15-year maturity. Of course, the TABs also are rated BBB+, and investors also can command a yield premium because many other redevelopment agencies are rushing to market.
(Feb. 28, 2011) -- ACA Financial Guaranty Corp. has posted its annual financial statement for 2010. ACA, once a single-A bond insurer, now operates as a “runoff” insurance company after a settlement with Maryland’s insurance department. The company’s insurance still covers about $5.6 billion of municipal obligations, including about $1 billion in California.
(Feb. 28, 2011) -- Puerto Rico is lining up a $250 million sale of general obligation bonds. These bonds are federal and state tax-exempt for investors across the U.S., including residents of California. As our February print edition explains, California Governor Jerry Brown helped provided some “yield manna from heaven” in one of the state’s tax-exempt bond sectors. Several deals in this sector are looming this week and will keep popping up in future weeks.
(Feb. 28, 2011) -- California’s Little Hoover Commission did the municipal market a favor last week by adding to the chorus of voices calling for public pension reform. The nonpartisan commission, which recommends ways for state government to become more efficient, warned that pension liabilities for current employees must be addressed to avoid drastic service cuts in the future. It would be a mistake for the state to squander this opportunity to pursue much-needed public pension reform.
(Feb. 25, 2011) -- About $30 million of Calexico Unified School District general obligation bonds have been downgraded two notches by Moody’s Investors Service. The rating fell to A3 from A1. Financial pressure isn't the issue. Management turnover is.
(Feb. 25, 2011) -- Tax-exempt rates continued to decline this week, pushing some yield measurements to the lowest level since late December. Longer-term bonds dropped more than one-tenth of a full percentage point. One of our new "benchmark" G.O. bond sales yielded 4.18% in 10 years. Details are in a weekly summary.
(Feb. 25, 2011) -- We often make the point that there is a “lag” between the time the economy recovers and a rebound occurs for many local and state governments. A new report by Moody’s Investors Service basically confirms this point, and cautions that “credit stress” in the municipal market is expected to continue through 2011.
(Feb. 25, 2011) -- Municipal bond fund outflows continued for the 15th straight week, based on figures compiled by Lipper FMI. However, the pace of outflows slowed again. Meanwhile, the Bond Advisor’s Index of California municipal bond funds jumped this month. That is because a municipal rally has lifted bond prices since a January sell-off.
(Feb. 24, 2011) -- We mentioned that redevelopment bonds are worth watching in the new-issue market, thanks to a yield “premium” because of Governor Jerry Brown’s proposal to curtail future local redevelopment efforts. Some deals will yield quite a bit just based on the bond rating, as this example shows.
(Feb. 24, 2011) --We have been talking elsewhere about interesting tax allocation bond opportunities after Governor Jerry Brown proposed curtailing local redevelopment in the future. The Assembly Budget Committee recently suggested a compromise might let the state get $1.7 billion out of redevelopment agencies without eliminating them altogether.
(Feb. 23, 2011) -- U.S. Treasury bonds rallied yesterday amid signs they might strengthen even more because of turmoil in Libya and the Middle East. Municipal bond yields also dropped again yesterday, although “technical” factors such as low new-issue supply are helping tax-exempt debt more than a rush to a “safe haven.” While turmoil in Libya and elsewhere might help U.S. securities look better, let’s not ignore a couple longer-term risks (while remembering an upside to owning "traditional" munis).
(Feb. 23, 2011) -- Roughly $7 billion bonds tied to the California Housing Finance Agency are on watch for possible downgrade, Moody’s Investors Service said. Keep your bonds straight because not all of the agency's debt is affected the same.
(Feb. 23, 2011) -- Last month in our print edition, the Bond Advisor explained some of the unprecedented developments affecting us in recent months. Part of the lingering impact of those developments is that our print edition in February is going out late in the month (probably mailed on February 24). Thanks to the new third party working with us, our print editions will have to go out at the start of the month beginning in April.
(Feb. 22, 2011) -- The deal to watch in this week’s new-issue market? The Fremont Redevelopment Agency may price $138 million of tax allocation bonds to help pay for a new Bay Area Rapid Transit station. We add a few more details on the sale here.
(Feb. 22, 2011) -- Awhile back we mentioned the “upside” of all the hand-wringing over funding levels for public pension plans. We predicted it would lead to a new level of scrutiny that forced state and local governments to start addressing any problems, or at least discussing them more openly. A rating agency recently said it will "enhance" its analysis of pension funding, and it singles out a few states for the challenges they face.
(Feb. 18, 2011) -- The new-issue sales calendar won’t be robust during next week’s holiday-shortened period. However, after taking Monday off, California’s municipal market will see some interesting new bond issues to ponder. A couple of the larger ones involve redevelopment and health care deals.
(Feb. 18, 2011) -- The big story in the tax-exempt bond market this week revolved around steadily declining yields. By some measurements, longer-term bonds saw yields fall about two-tenths of a full percentage point. A “technical” factor still is playing a role because new-issue volume remains slow. We look at the week's trends and also mention a benchmark sale.
(Feb. 18, 2011) -- Municipal bond funds continued to see “outflows” in the latest weekly reporting period. However, for a change outflows dropped below $1 billion. The tax-exempt bond market rallied despite the lemmings heading for the door.
(Feb. 17, 2011) -- The other day another local redevelopment bond in California was downgraded. About $30 million Series 2007 tax allocation bonds issued by the Banning Redevelopment Agency were lowered one notch to BBB from BBB+, Fitch Ratings explained in a report. We talk about this a little more because of other angles to consider, including trading values.
(Feb. 17, 2011) -- After a couple days of bullish secondary market trading, tax-exempt yields have dropped by close to one-tenth of a percentage point on some securities. The lack of new supply isn’t hurting, either. We also mention a couple new pricings here.
(Feb. 16, 2011) -- Here is one sign of a relatively slow new-issue municipal bond market. We are “previewing” new sales that aren’t “story” bonds or large deals. Still, every once in awhile we like to call attention to a sale that will entice conservative buyers. For example, this deal fits the bill.
(Feb. 16, 2011) -- We don't support new federal oversight in plenty of areas, but we can make an exception for this idea. Recent proposed federal legislation seeks to pull aside the curtain on state and local public employee pension plans by requiring uniform financial statements filed with a central repository. Even better, issuers that didn't participate would give up the right to get lower borrowing costs. The idea is discussed here.
(Feb. 16, 2011) -- We don’t usually discuss one-notch rating changes in either direction unless there is a substantial trend at stake. However, we make an exception in this case just because it involves a tax-exempt bond rated below investment grade.
(Feb. 15, 2011) -- Standard & Poor’s ratings on some Lancaster redevelopment bonds tumbled a handful of notches because of assessed valuation declines and other factors. Bondholders need to be careful about a knee-jerk reaction to these downgrades, especially because they will get hammered for panic selling.
(Feb. 15, 2011) -- Only a few hours after we posted the item below yesterday (“Do Not Bring Back Taxable Build America Bonds”), President Obama proposed resurrecting taxable BABs in his fiscal 2012 budget plan. We discuss his proposal here.
(Feb. 15, 2011) -- Oakland Unified School District general obligation bonds were downgraded to the lowest investment-grade level by Standard & Poor’s the other day. The ratings were then withdrawn because of the district’s lack of financial audits. The state needs to do even more than it has in the past to figure out this school district’s budget and accounting mess.
(Feb. 14, 2011) -- The drumbeat keeps building in pockets of the municipal market to bring back taxable Build America Bonds. That is the last thing we want to see in this year or any year.
(Feb. 14, 2011) -- In Friday’s weekly market summary we discussed a bond sale that “took the cake” for relatively high tax-exempt yields. That was before we saw the yields on another recent new deal.
((Feb. 11, 2011) -- One bond sale in particular caught our attention this week because of some nifty tax-exempt yields, including 4.09% in five years. Our weekly summary of recent new issues includes a few other examples of deals that yielded less. Sorry, 4.09% tax-exempt in five years is still the exception.
(Feb. 11, 2011) -- An $80 million bond offering by the Imperial Irrigation District will get attention next week. The electric system refunding bonds fund an "essential service" and are popular with several types of investors. A few local school district bonds also might price.
(Feb. 11, 2011) -- Municipal bond funds continued to see “outflows” in the latest weekly reporting period. Our “kind” of municipal bond investor doesn't run with these lemmings, even when they stampede.
(Feb. 10, 2011) -- The State of California’s tax revenue beat estimates for the month of January, coming in $715 million higher than projected in a proposed spending plan, the state controller’s office said. See a brief summary here.
(Feb. 10, 2011) -- The final pricing of the San Joaquin County Transportation Authority gives a decent read on tax-exempt rates for a "solid" muni bond in today's market. We like the fact that there was a broad maturity range.
(Feb. 10, 2011) -- California Housing Finance Agency bonds issued under the agency’s home mortgage indenture (and currently rated single-A) face a potential downgrade by Standard & Poor’s. See why here.
(Feb. 9, 2011) -- Certain California bonds used to finance office buildings will stay outstanding after Governor Jerry Brown canceled a plan to sell and leaseback the 11 state properties. Brown said the sale and leaseback proposal would cost the state more in the long run, even if it provided a one-time revenue boost for the budget.
(Feb. 9, 2011) -- A deal we highlighted in recent previews could end up yielding about 5.5% tax-exempt on a 20-year bond. Another deal we mentioned the other day could yield about the same on a 13-year maturity, and it includes a financial guarantee to boot. You can probably guess which one is a California county sales tax revenue bond and which one is a Puerto Rico general obligation. Here are the details.
(Feb. 9, 2011) -- The City of Commerce development commission and Los Angeles County have been negotiating about a difference of opinion over a tax increment for a redevelopment project area. That doesn’t sound too sexy, except the county’s view of the tax increment limit raises issues for certain bond covenants. Commerce recently explained what it is doing to stay in compliance with the bond covenants. We also find it interesting that talks over the tax increment limit are “on hold.” The county apparently wants to see how Governor Jerry Brown’s proposal to do away with local redevelopment agencies fares in coming months.
(Feb. 9, 2011) -- As for the testimony at today's U.S. House of Representatives subcommittee hearing titled “State and Municipal Debt: The Coming Crisis?,” all you need to know is this. The smarter witnesses, in our opinion, are patiently explaining that laws don’t have to be amended to allow states to seek bankruptcy protection. Some of the poster-child states for poor budget practices can already fix their fiscal problems on their own, they just keep resisting taking the necessary steps. Either they are deluded that tax revenue will rebound to bail them out again, or the so-called leaders are in the back pockets of various public labor unions.
(Feb. 8, 2011) -- We are probably about the only publication in the world that will write about this topic at any length, but we do so for a reason. The middleman that processes payments from issuers and paying agents and then gets the money to bondholders on the semiannual due date has made an important procedural change. On another page we talk about this change at length because on rare occasions some bondholders might start getting their payments at least a day late if the issuers or paying agents don’t comply with the middleman’s requirements. One rating agency just devoted a six-page report to this topic and even warned that bond outlooks or ratings could go lower in the future if issuers and paying agents become chronic offenders in making late payments because of operational or administrative problems (as opposed to real credit weakness). The municipal bond market doesn’t need a black eye over an issue that doesn’t have to arise, especially at a time when tax-exempt debt is getting enough negative attention over kooky default predictions.
(Feb. 8, 2011) -- Believe it or not, you can still find some “good news” items in the municipal bond market. At the risk of running afoul of the Chicken Littles and the “negative news” police, we are going to mention just one piece of “good news” about a smaller issuer that received a two-notch upgrade. Don’t tell anyone about it, however, because this “news” fails to conform with the current accepted wisdom (in some corners) about risk and municipal bonds.
(Feb. 8, 2011) -- A U.S. House of Representatives subcommittee will hold a hearing on Feb. 9 titled “State and Municipal Debt: The Coming Crisis?” Some media previews of the hearing don't keep the question mark after "crisis." It does matter just a little. The hearing will include useful comments on public pension reform.
(Feb. 7, 2011) -- On February 2 we highlighted a couple new sales that could price this week, including the San Joaquin County Transportation Authority sales tax revenue bonds. An updated discussion includes several other potential pending sales. For example, this week an investor seeking a yield premium can buy a bond ultimately backed by California's credit, even though the state is holding off on new general obligation bond sales. Hint: it has something to do with Cal-Mortgage insurance that backs hospital and other nonprofit deals.
(Feb. 7, 2011) -- In our January print edition we discussed the “lemmings” who have been leaving the municipal bond market. We look at the latest numbers on even more municipal bond fund "outflows" and note why the trend affects all investors and yet isn't always the entire story.
(Feb. 7, 2011) -- Two of our tables that reflect ongoing municipal bond market trends have been updated. Usually this wouldn't justify a mention, but these tables hadn't been updated during a recent "hiatus." We discuss the updates here.
(Feb. 4, 2011) -- The latest RBC U.S. Consumer Outlook Index found that 62% of consumers surveyed “are not confident in municipal bonds as an investment.” Only 22% of those polled find muni bonds to be a "good investment." One has to consider the consumers surveyed in looking at the results, and our take does just that.
(Feb. 4, 2011) -- A weak economy and declining real estate valuations have reduced the financial cushion for $153 million Pittsburg Redevelopment Agency subordinate tax allocation bonds. In response, Fitch Ratings cut the subordinate rating by five notches to BB+. The senior TABs fared better and were only cut one notch to single-A.
(Feb. 4, 2011) -- A bond insurer downgraded during the financial crisis has agreed to purchase Municipal and Infrastructure Assurance Corp. So what will it do with this "shell" insurance company? This summary mentions a couple ideas.
(Feb. 4, 2011) -- Tax-exempt rates didn't change much this week, perhaps a relief to some after the recent wave of municipal bond sell-offs. U.S. Treasury rates rose.
(Feb. 3, 2011) -- So, according to a new rating agency report, there is a continuing "negative" outlook on the nonprofit healthcare sector. But what does this mean for smaller investors spooked by enough "negative" news already? We discuss the municipal bond angle and note the value of analyzing "global" trends here.
(Feb. 3, 2011) -- Standard & Poor’s is standing by its proposed criteria changes for bond insurers, while adding that the plan is still up for “serious” consideration as the rating agency weighs comments received through March 25. Assured Guaranty has a lot at stake in how this plays out and we look at the S&P discussion here.
(Feb. 3, 2011) -- Given the exhaustive comments we have made since the financial crisis about municipal bonds, and wildly-inaccurate predictions about their demise, we wonder why it is even worth commenting on some pundits. We briefly consider a couple questions about crazy predictions
(Feb. 2, 2011) -- Assured Guaranty Corp. isn't too happy with a proposal by Standard & Poor's to change its rating criteria for bond insurers. Since the insurer's subsidiaries (especially Assured Guaranty Municipal) are the main players left in municipal bonds for this product, the topic is worth a short discussion.
(Feb. 2, 2011) -- The point has been made in recent days that new sales are off to a slow start in the municipal bond market for 2011. True, but there are still plenty of deals in the hopper. We discuss a couple of them here and will start soon highlighting other pending sales when a new feature is unveiled for existing subscribers to our print edition.
(Feb. 2, 2011) -- Three-notch rating changes always get our attention, especially if they are a downgrade. This page looks at one such downgrade for a private university.
(Feb. 1, 2011) -- In the box to the right, which is due for some long-needed updating, we mention our famous tongue-in-cheek suggestion that investors raise cash for a past buying opportunity by tearing the copper pipes out of their homes. The lemmings have been on the run again recently, dumping muni bonds left and right. It might look like late 2008 again, but is it? We ponder the recent trends here, and say a lot more about them in our newest print edition. Speaking of past predictions, our latest print edition also revisits what we expected to happen when Vallejo filed for bankruptcy. Our predictions for the city’s debt panned out, and there are lessons for small and big investors alike. Recent market conditions have taken a toll on new municipal bond sales. Here are some numbers on just how slow it was in January. Some other numbers are being released today and they show state tax revenue is doing better. California needs more than that, as last night's State of the State speech illustrates.
(Feb. 1, 2011) -- Our latest mailing mentions that we’ve faced a few interesting months. It didn’t surprise us, then, to hear from the U.S. Post Office yesterday. It turns out they found a small bundle under a large cart on Monday. It figures that it had to be our bundle. That means most of you had the latest mailing go out Jan. 29. A very small number of you had the mailing go out Jan. 31 because of this snafu.
(Jan. 31, 2011) -- A new set of updates will begin February 1. Existing subscribers to the print edition will receive "bonus" coverage soon through a log-in page. There will, however, continue to be some "free" content here for at least a short period of time. Because of some interesting reactions to our recent crackdown on the abuse of content, we also are working on new avenues for existing subscribers to contact us. Expect more on that later in February.
(Jan. 31, 2011) -- There is still some issuance in the municipal market, and we discuss potential bargains in a mailing that just was sent. Here is a short take on the new-issue problem.
(Jan. 28, 2011) -- Our update below mentions a "new letter" going to subscribers. It was actually sent Jan. 29 with a new print edition.
(Jan. 26, 2011) -- In previous updates and in a letter to subscribers, The Bond Advisor noted it had acted against certain individuals who have either misused our content or otherwise distributed it without permission. A new letter going to subscribers on Jan. 29 provides updates on several steps we have taken to deal with such issues and our print publishing schedule, including the plan for resuming "limited" free updates here in February. In the future most updates will be provided only to existing subscribers to the print edition. More to say on this beginning next week.
The older archived material below will be removed soon for new content.
(Sept. 3) -- This is a great time to avoid the new-issue market, unless you really want to buy a 10-year general obligation bond that yields 2.29%. Our weekly review looks at a handful of new issue yields. The market will be slow again next week due to the Labor Day break.
(Aug. 27) -- Tax-exempt yields, as measured by certain indices, now stand at 1967 levels. Our weekly review looks at the ugly reality, such as a new 10-year bond yielding 2.63%.
(Aug. 27) -- The sales calendar for new tax-exempt bonds looks slow as the month of August winds down. We list a few planned sales for next week.
(Aug. 27) -- The Bond Advisor finally became fed up with certain individuals who have either misused our content or otherwise engaged in damaging action. While we apologize that August's print edition is going out at the end of the month, the last two weeks have been consumed with coordinating and bringing action against these individuals. It obviously brought our Web updates to a trickle as well.
(August 27) -- It can be a good thing for bondholders when the state withholds payments to other governments and districts. This week provided a case in point.
(August 23) -- The Southern California Public Power Authority plans to sell $533 million of tax-exempt revenue bonds this week. Thank goodness, because there isn’t much else going on in the new-issue market.
(Aug. 20) -- Tax-exempt yields keep dropping as a flight-to-quality helps safer bonds, led by U.S. Treasuries. Our weekly review mentions a couple of the week’s new pricings. Next week a bigger deal finally looms from a prominent utility.
(Aug. 17) -- The headline says it all. We did more juggling and need to finish the August print edition.
(Aug. 13) -- Tax-exempt yields can’t keep dropping forever, can they? Maybe not, but for now rates just keep edging lower week after week. It didn’t help that the new-issue market was so quiet, at least in California. We are posting our weekly summary a little early due to a scheduling obligation. We have now updated it Friday morning to include a couple more pricing examples.
(August 12) -- The supply drought of new-issue sales is causing yields on high-quality tax-exempt bonds to keep dropping, including these "generic" ugly examples.
(August 11) -- Moody’s Investors Service has changed its rating outlook for Puerto Rico general obligation bonds to negative from stable. Why? The Commonwealth faces pressure trying to meet retirement costs for employees
(Aug. 10) -- City of Bell general obligation and pension obligation bonds have been downgraded five notches by Standard & Poor’s amid a controversy over the city’s financial practices
(August 10) -- An $11 billion general obligation water bond scheduled for this November’s ballot has now been officially postponed until 2012. We still hope it loses.
(August 9) -- New sales of tax-exempt bonds will be relatively slow again this week, including in California. It must be the dog days of August. You would think issuers would be falling over themselves to lock in current low rates. While we have a definite plan to get our print editions out toward the beginning of the month, and have made a new hire to accomplish just that, August’s print edition will mail later this week. We have a good reason because re-juggled essays will include a commentary on one issuer’s tricky strategy to make a bond payment. It is worth delaying the print edition by a few days to provide our thoughts.
(Aug. 6) -- Tax-exempt yields kept dropping this week. It wasn't a real busy week in the new-issue market, but examples of yields can be found here.
(August 5) -- We find it interesting that the City of Maywood, which recently got rid of most of its employees and contracted out its services to another city, has had a credit rating withdrawn for “lack of timely information.” Perhaps the city needs to rehire an accounting clerk or budget officer. Elsewhere in the market, the bankruptcy filing by a bond insurer’s holding company doesn’t affect the bond insurer’s operations. This is worth noting due to a real-life example. Our August print edition will mail by the end of this week, just for your information.
(August 4) -- The recent ratings “recalibration” by a couple rating agencies continues to lead to some interesting stories. In Puerto Rico, for example, a provider of an essential service saw its bond rating rise to BBB-plus from BBB-minus after recalibration. Now, however, a downgrade brought the rating to BBB. We guess the glass is still half-full, not half-empty, if the rating is still a notch higher than it was in the spring.
(August 2) -- Sales of new tax-exempt bonds in California’s municipal market will be somewhat light this week, though a handful of school issues will keep the fire alive. Across the U.S., new sales of tax-exempt bonds dropped by 15% in July over the same month a year ago.
(July 30) -- Tax-exempt yields kept dropping this week even as U.S. Treasury rates rose. This week a “name” issuer came to market. By that we mean an issuer with widespread recognition based on its name alone. The City of Beverly Hills fits the bill of a “name” issuer and this week it offered lease-revenue bonds. Our weekly summary looks at yields on various new issues. Beverly Hills got off cheapest this week, paying a tax-exempt 1.49% in five years and 2.92% in 10 years.
(July 29) -- We have a lot of acronyms in the headline above so let us explain. This is turning out to be a good month for Alameda Municipal Power (AMP) in terms of credit upgrades. We figured it can’t hurt to highlight AMP’s second upgrade this month. Of course, downgrades tend to get more attention. The California Housing Finance Agency (CHFA) was put on notice by Moody’s Investors Service that it might face a downgrade of its issuer rating. The potential action would affect $1.3 billion of bonds that are now rated A1. (Keep your bond issuers straight; the agency also has certain home mortgage bonds that are rated A3.) New legislation to extend taxable Build America Bonds was introduced in the House.
(July 28) -- Recent days featured well-publicized posturing over California’s delayed budget, including threats to let the next governor deal with the mess absent reforms. In response, the state’s controller warned California is only a few weeks away from needing IOUs in order to preserve cash for high-priority protected payments, including bonds. Elsewhere in the market, we mention a few examples of tax-exempt yields from a general obligation bond sale yesterday. A tax-exempt bond for an apartment project in Fontana was downgraded three notches this week.
(July 26) -- In general, issuers of tax-exempt bonds with double-A or better ratings have garnered great tax-exempt rates from a borrower’s perspective this year. The single-A category has been a different story and this week’s new-issue sales in California will include a few single-A deals. As usual, the type of credit will produce varying yield levels. This week’s single-A deals include a general obligation bond, a health care issue (rated A-minus and Baa1), and a revenue bond secured by several community facilities districts. Issuers also continue to benefit from money flowing into bond funds. Last week the funds saw more “inflows,” which has been the trend again for almost all of 2010.
(July 23) -- Tax-exempt yields dropped this week, down by as much as one-tenth of a percentage point on some maturities. Several new double-A deals priced this week and the rates settled in relatively narrow ranges. Plenty of demand for tax-exempt bonds, especially higher-quality issues,provides a boost for new deals rated double-A and higher. In contrast, a new single-A deal with bond insurance still had to pay a full percentage point more than higher-quality deals on some maturities. Our weekly summary here discusses recent market trends.
(July 22) -- The Eisenhower Medical Center in Rancho Mirage has picked up a one-notch downgrade from Moody’s Investors Service. We stand by our position that such “bad” news also can provide a buying opportunity for an investor seeking added yield from a new issue, especially now that the Moody’s rating falls in the triple-B category. Among other upcoming new issuers, a couple well-known names include a sale by Beverly Hills. The broad financial reform bill signed this week is creating some confusion. Among other things, rating agencies don’t want their grades published in the offering documents for certain new bond sales. As far as we can tell, however, this shouldn’t affect the municipal bond market.
(July 21) -- Bond insurer Syncora Guarantee Inc. can resume covering claim payments as of today (July 21), thanks to progress made in meeting statutory capital requirements. This insurer was once known as XL Capital Assurance. While many of the municipal bonds XL backed won’t default in the first place, there are a few that could. One troubled city in California used the bond insurer for a 2005 deal that recently relied on a reserve fund draw to cover a bondholder payment, and the details are here. A couple higher-quality issues priced already this week and the yields reflected a seller's market (a tax-exempt 2.75% in 10 years, for example). Elsewhere in the market, municipal bonds sold for Sacramento International Airport were downgraded one notch by Standard & Poor’s
(July 20) -- A prominent health-care provider in an affluent community has been making capital investments to provide longer-term opportunities. This also has led to a bond downgrade, though some might see this a buying opportunity to get a little more yield.
(July 19) -- New “competitive” bond sales, where underwriters compete to win bonds through a sealed-bid process, will play a bigger role in this week’s new-issue market. Several issuers are using this competitive process to sell debt in the days ahead, including a few general obligation bond issues. Usually there are more “negotiated” sales each week, where the underwriting team is selected by an issuer ahead of time. We also open the week with a couple longer items. In one, we discuss the growth of taxable Qualified School Construction Bonds. Many California school districts have used this taxable option recently, and it has to eat into tax-exempt volume. In another longer item, we explore why municipal analysts for “bigger” investors are riled up by a taxable municipal bond for a Tribal gaming project. One hint: the issuer used a court decision as a reason to quit making debt service payments. The municipal analysts want a federal appeals court to reverse the decision, in part to avoid setting bad precedent for the broader municipal market. Investors want to make sure they can rely on representations made by issuers and their lawyers, and the Tribal dispute gets to the heart of this matter.
(July 16) -- This week’s new sales included some high-quality issuers. As expected, they were able to sell bonds at relatively low yields given the current market environment. In contrast, a single-A issuer of general obligation bonds paid almost a full percentage point more than the higher-quality issues on a 10-year maturity (and the single-A deal included AG Municipal bond insurance). All the details of these and other pricings are discussed in our weekly summary. By the way, the low yields on some of these higher-quality deals explain why we discussed a barbell strategy with a “twist” in July’s print edition. Elsewhere today, Alameda Municipal Power has received a two-notch upgrade to A+ from from Fitch Ratings as the utility gets ready to refund all of its outstanding certificates of participation.
(July 15) -- Taxable Build America Bonds are eating away at tax-exempt bond supply week in and week out. Want a few more depressing examples?
(July 13) -- High-quality borrowers still have nothing to complain about, do they? The other day a school district’s bond sale included a 1.47% tax-exempt yield in five years. That is about the lowest we have seen for any new sale in recent memory. Meanwhile, an updated report tracking state revenue shows a positive trend in the first quarter. Some of the improvement, however, reflects tax legislation, not better economic activity.
(July 12) -- In 1990 we wrote about "Chicken Little" journalism, citing several stories predicting a “disaster” for municipal bonds. Two decades later it isn’t difficult to find similar stories again. Are they just as wrong in 2010 as in 1990? Meanwhile, across the U.S., overall local and state tax collections were up in the first quarter over the same period in 2009. In a sign that the “lag” is showing up, one prominent source of tax revenue declined a bit. This week’s new issues will include a prominent water agency that is rated triple-A by two of the rating agencies.
(July 9) -- Our weekly summary of yields on recent sales mentions a couple examples. The Virgin Islands "rum" bonds also priced. In general, however, activity slowed after a day was lost to the July 4th observance. An irrigation district's planned sale of electric system certificates of participation will be delayed because of a legal challenge. Even if a lawsuit has little or no merit, an issuer has to disclose a direct challenge to a debt sale. A prominent water district plans to sell bonds next week and safety-oriented investors will line up around the block for the high-quality debt.
(July 8) -- A college district with a double-A rating on general obligation bonds will be in the market within a week. Meanwhile, an irrigation district planning to sell electric system revenue bonds is getting mixed signals from rating agencies. The other week it was downgraded a notch by one agency; this week it was upgraded a notch by another. Since it is July already, politicians might want to get busier on a state budget for the current fiscal year that began July 1. There is support from some interesting places for a spending cap on California’s annual budget.
(July 8) -- A larger-than-usual July print edition has been wrapped up and has gone in the mail on July 8.
(July 6) -- New bond sales will probably remain light during the holiday-shortened week. The good news is that a new bond sale tied to rum production in the Virgin Islands is planned for pricing. We have written about such “rum” bonds before. These bonds are tax-exempt for California residents from both state and federal levies. In California, new deals include a hospital district’s G.O. bond and a state infrastructure bank sale backed by the University of Southern California. Municipal bond funds saw a rare week of "outflows" as the first half of the year drew to a close.
(July 2) -- Falling yields on U.S. Treasury bonds are the big story in the credit markets. Tax-exempt yields dropped a bit this week but municipal bond rates aren’t dropping anywhere near as much as Treasuries. That is a good thing for income-oriented investors, tax-exempt yields are low enough already. The new-issue market in California was steady this week ahead of the lull for the July 4 break. A new double-A school G.O. yielded 3.65% in 10 years. Redevelopment bonds continue to grab the spotlight for providing juicier returns in exchange for single-A (or lower) credit ratings. New tax allocation bonds yielded a tax-exempt 5% and higher on 10-year bonds this week. A health-care district sold 19-year bonds that yielded 5.10%; they are insured by a state program. Our week in review section discusses all the new deals and related trends.
Tax-exempt Bond Sales Drop By Almost 45% In June From 2009
(July 1) -- June wasn’t a good month for new tax-exempt bond sales across the U.S. The volume dropped by 44.7% over June 2009. Of course some of that trend reflects the popularity of taxable Build America Bonds, the federal giveaway that helps subsidize local interest costs. Mendocino County’s credit rating dropped by one notch yesterday. That might not be particularly noteworthy, but some figures about the county’s retirement costs caught our attention.
(June 30) -- This is an interesting twist. A new general obligation bond sale that priced yesterday was rated Aa2. However, it also included a guarantee from a bond insurer, even though the insurer is rated a notch lower at Aa3. Meanwhile, an irrigation district that used to have an Aa3 rating has been downgraded to A1. That doesn’t change our view that investors of all stripes should consider the district’s $427 million bond sale in July. We noticed our governor wants to delay November's election for an $11 billion G.O. bond for water improvements. We don’t like the bond proposal in the first place and want to see it lose, whether in 2010 or 2012. Meanwhile, local and state tax collections across the U.S. rose slightly in the first quarter over the same period of 2009. These governments, along with anyone else hoping for an economic rebound, don’t want to see a double-dip recession; that prospect helped spook stock prices yesterday.
(June 29) -- Our June print edition finally mailed on June 29, reflecting the fact May's issue went out later in the month. We also took on some unexpected speaking engagements in June that required travel; that delayed June's issue. Some of what we learned from investors at the meetings we attended prompted us to write a new essay you will see on the front page of June's edition. July's issue will return to our pattern of mailing earlier in the month, with a larger-than-usual edition going out no later than July 7.
(June 29) -- A U.S. Supreme Court decision that lowered one risk for tobacco companies also will have a "muted" benefit for municipal tobacco bonds.
(June 28) -- The City of Maywood is getting plenty of attention for its unusual strategy to deal with an insurance problem. Maywood’s problems also generated a credit rating warning. Separately, certain municipal tobacco bond maturities in one bond issue have been downgraded. July 4 is just around the corner, but that isn’t stopping several new bond issues from pricing this week. Sick of seeing taxable Build America Bonds eat away at tax-exempt supply? A federal bill to extend taxable BABs didn’t pass the other week, but this will probably be a temporary setback. Other issues in the bill caused it to stall. We still expect Congress to keep taxable BABs alive after this year.
(June 25) -- Issuers in Guam and Puerto Rico sold some of this week's bigger new deals. Our weekly summary looks at recent pricing levels on new issues. Tax-exempt yields didn't change much in recent days.
(June 24) -- A $1.5 billion taxable Build America Bond priced in California's market today. Would a tax-exempt investor be better off passing?
(June 23) -- At a time of unprecedented “bad” press for municipal bonds by unsophisticated media commentators, we give the Ridgecrest Redevelopment Agency a mention for earning an upgrade during a tougher time for some tax allocation bonds. The upgrade won’t get any headlines from the sky-is-falling press. In the good news, bad news department, a school district with a tony name is selling high-quality general obligation bonds. However, most of them won’t be tax-exempt. A stupid proposal to help balance the state budget might run afoul of a past voter-approved proposition to block “deficit” borrowing. Some of our politicians just never learn.
(June 21) -- California Veterans G.O. bonds will be priced this week following credit upgrades. Puerto Rico will also be in the market, along with several other issuers.
(June 18) -- California Veterans G.O. bonds are now rated higher by S&P and Fitch than the state's "regular" general obligations. A new law helps the veterans bonds; Moody's recently said it might upgrade the bonds in the future.
(June 18) -- Tax-exempt bond yields rose a little in recent days. The new-issue market was full of variety. As our weekly summary notes, you could get higher-quality bonds yielding 3.20% in 10 years or get a full percentage point more on lower-rated debt.
(June 17) -- California Veterans G.O. bonds might get a higher rating than the state's "regular" general obligations. New legislation is the key. Meanwhile. a certain county redevelopment agency's project area was downgraded by two notches. Even so, we find a new bond issue for the area intriguing thanks to the yields on triple-B bonds. Puerto Rico plans a big sale of sales tax revenue bonds that are worth a look from California residents. The City of Stockton gets a lot of bad publicity over budget problems; even so, a downgrade still leaves it in a single-A category from S&P.
(June 16) -- You can't complain about low yields on some deals, as long as you are willing to accept a lower credit rating as well. How about 4.875% on a nine-year bond?
(June 15) -- A bond insurer that guarantees billions and billions of municipal bonds is still worthy of tracking, especially if a regulator is trying to salvage value for policyholders. A bond issuer also is trying to improve its financial standing by pursuing a new charge; that might lift the credit rating from BB. The State of California might be doing a little better, but a new forecast keeps a lid on unfettered optimism. Times are still tough.
(June 14) -- A good mix of new bond sales is pending this week. See a short summary of a few deals here.
(June 11) -- Tax-exempt bond yields jumped in recent days, making the biggest move in several weeks. As our weekly summary notes, bond insurer Assured Guaranty Municipal (AGMuni) played a role in more new issues this week.
(June 10) -- On May 26 the Los Angeles Community College District Board of Trustees approved a new $1.2 billion general obligation bond sale. The deal is now almost ready to price because Los Angeles County has the tax levy on its June 15 board agenda. Another issuer plans a sale of triple-A water revenue bonds soon.
(June 9) -- A rating agency gives California a little credit with a rating affirmation, and points out the real problem. Meanwhile, operating losses drop a couple hospital municipal bond ratings by one notch.
(June 8) -- Among the tools municipalities have to pay for legal settlements are something called judgment obligation bonds. One city plans to sell such debt this week. We also update our plans for mailing the larger-than-usual June print edition here.
(June 7) -- A triple-A city G.O. bond and a power revenue bond with split Aa2 and AAA credit ratings are among this week's new offerings. In other news, the state's treasurer made even more remarks on credit default swaps. We also discuss a downgrade of municipal debt to single-D and explain why it isn't as dire as you would expect.
(June 4) -- Tax-exempt bond yields didn't change much this week. As our weekly summary explains, new issue yields topped 3% on some 10-year bonds, and 5% on one sale. A power authority deal we mentioned yesterday received another upgrade. A new survey indicates overall U.S. state revenue might not return to 2008 levels until 2013.
(June 3) -- When a certain famous investor speaks, he generates headlines. His comments about municipal bonds, however, are not always helpful. Maybe this same investor also wouldn't care for this power authority's municipal bonds, but some savvy investors might like the yields. Meanwhile, if you want low yields, this issue fits the bill.
(June 2) -- The tax and revenue anticipation note season is upon us. Short-term note yields remain dismal, as this example shows. As with tax-exempt bonds, you can find added yield premium by going down the short-term rating scale.
(June 1) -- This week's new bond sales include a prominent university system with high credit ratings and a local redevelopment agency with a rating that ensures decent yields. We also mention one of next week's sales (planned on June 9) because a city will sell triple-A bonds. New sales aren't necessarily boosting the amount of tax-exempt volume; in fact, in May tax-exempt issues declined from 2009, even though overall municipal bond sales rose. Also, we mention a county upgrade from last week; the doom-and-gloom media won't include such upgrades in their sky-is-falling stories.
(May 28) -- The Tamalplais Union High School District was rewarded this week for its triple-A rating on G.O. bonds. It only paid 2.81% to borrow for 10 years. Yields in general didn't change much for tax-exempt munis. Examples of other new-issue yields can be found in our weekly summary.
(May 27) -- Some local and state governments are discovering there is a price to pay when you hop in bed with Uncle Sam to get an interest-rate subsidy for taxable Build America Bonds. What, they expected a free ride? A federal regulator that is taking a much-needed interest in municipal bonds on behalf of investors approved some tinkering around the edges on disclosure. It is a start, but much more is needed. An issuer that is favoring taxable BABs for a new sale also priced some tax-exempt crumbs.
(May 26) -- A power agency that helps finance projects for several participants will meet on May 27 to approve $450 million of bonds for a new energy plant. Smart investors keep buying all sorts of municipal bonds. However, according to some of the latest media reports, danger is lurking around just about every corner. Why don't they add this line to these stories: "Lions, and tigers, and bears! Oh, my!" The biggest danger in Sacramento is represented by political ideas such as this one, which calls for even more borrowing to "balance" the budget. What creativity, but would you expect anything else from these lapdogs for the public unions?
(May 25) -- Municipal bond funds can't complain about much in terms of "inflows." They are now closer to a total of $500 billion in assets, which would be a tidy figure to pass. And some weekly "outflows" in April have been reversed by more "inflows."
(May 24) -- Issuers looking to hitch a ride on the federal gravy train known as taxable Build America Bonds might soon have another reason to sell this type of debt in 2010. The federal subsidy might drop in 2011. Speaking of taxable BABs, one of this week's bigger sales will use taxable BABs for more than three-quarters of the overall issue. Another pending sale is flagged because of the credit rating, a still-uncommon triple-A.
(May 21) -- Tax-exempt yields dropped this week, though not as much as U.S. Treasury bond rates. Concern in Europe is driving investors to the safety of U.S. Treasuries, and munis are indirect beneficiaries. Several new deals priced this week; go here to see our weekly summary.
(May 20) -- Our June print edition is going to be 50% larger than usual to include timely topics that were removed because of late changes in May's edition. We made one more late change that added a half-page story in May; as a result, our printer couldn't mail May's edition until May 19 instead of May 17. But it's definitely on the way now.
(May 20) -- Several new issues priced the other day, including one from our favorite BBB+ power utility. Another new sale featured capital appreciation bonds and we include those yields as one of our occasional examples. The Modesto Irrigation District isn't implementing electric rate increases on a timeline expected by a rating agency; as a result, it was downgraded 14 months after being upgraded.
(May 19) -- California's independent Legislative Analyst's Office agrees with Gov. Arnold Schwarzenegger on one thing. As for budget solutions, however, there is some divergence.
(May 18) -- Tax-exempt bond sales this week also will include a utility deal we forgot to mention yesterday. We have mentioned this utility quite a bit because of recent bigger sales. It didn't surprise us a bit that a certain toll road deal was downgraded amid the current economic environment. And, everyone has known about the challenges facing these toll road projects for several years.
(May 17) -- Tax-exempt bond sales this week will feature school and irrigation district deals. A taxable issue by a prominent utility will be the biggest sale. Our May print edition is incorporating all the latest state budget updates and proposals, but that meant mailing it on May 17.
(May 14) -- Tax-exempt yields rose a little this week, though not as much as U.S. Treasury bond rates. We return this week to a theme discussed by us for quite awhile: the yields on certain single-A bonds vis-a-vis higher-rated munis. Go here to see our discussion.
(May 13) -- A big utility is reviving a delayed bond sale. There will not, however, be many tax-exempt bonds, but plenty of taxable you-know-whats. Meanwhile, a hospital that includes a prominent name in its title is upgraded before an upcoming bond sale.
(May 12) -- Usually it is "good news" to see a $3 billion municipal bond sale looming. However, tax-exempt investors won't like this one. The state's May 14 budget revision will no doubt be "terrible" in more ways than a governor's spokesman intended. Elsewhere in the market: When your bonds are already rated single-B, maybe a downgrade to B-minus isn't a big deal.
(May 11) -- Securities and Exchange Commission Chairman Mary Schapiro finally is up to speed on the Bond Advisor's complaints from the 1980s. We mention bond insurer Assured Guaranty from a couple angles: We mention a recent earnings report here, and cite an example of an insured yield from a recent pricing. It was a full percentage point higher than a high-quality water revenue bond.
(May 10) -- We made several changes to include new developments and are reprinting a section of the May print edition; we will mail it this week instead. California on Friday released a revenue update that we already previewed; as expected, actual receipts missed estimates by a big chunk in April.
(May 7) -- Tax-exempt yields didn't drop as much as U.S. Treasury bond rates but they were certainly lower. The credit crisis in Greece helped drive a rally in safer bonds. An insured triple-B hospital revenue bond came to market and yielded 5.00% in 16 years. Most new muni bonds didn't provide rates anywhere close to that, but there was a good mix of sales this week and some of the details are here.
(May 6) -- Issuers don't want to miss out on relatively low tax-exempt yields, one reason more of them are planning to sell bonds soon. We highlight just a few examples of pending deals. The current "seller's market" helped boost this week's prominent new issue by a whopping billion dollars as buyers lined up around the block. In the downgrade department, an issuer is doing pretty well but saw its credit rating cut over looming capital plans.
(May 5) -- The state can get its grubby hands on $2 billion of local redevelopment funds, a judge ruled. (Okay, he didn't say "grubby hands.") The money transfer cannot, however, take precedence over existing bond payments. Big investors were glad to get almost 7.4% tax-exempt on a 15-year maturity in a financing designed to help a hospital district exit bankruptcy. See which district here. The week's biggest sale is wrapping up.
(May 4) -- Smaller "retail" investors ordered about half of the California Department of Water Resources $2 billion offering of power supply revenue bonds. State Treasurer Bill Lockyer isn't finished griping about credit ratings about municipal bonds, and he wants a pending U.S. reform bill to reflect his concern. Speaking of the state, California's personal income tax collections in the key month of April were below estimates, and that means the next budget just got tougher. Meanwhile, a merger between two major airlines could lead to a small rating change on their conduit municipal bonds; some ratings might go up, or some might go down, depending on how the merger plays out.
(May 3) -- California's Department of Water Resources is offering a "preliminary" yield of 3.8% in 12 years for its power supply revenue bonds. The $2 billion deal will mature from 2011 to 2022 and is rated a low double-A. The yield during the "retail" order period can change when bigger investors weigh in. Long Beach's double-A harbor revenue bonds yielded 3.74% in 12 years last week.
(May 3) -- A triple-B hospital issue carrying bond insurance will offer more yield, but a much bigger power-revenue debt sale will get the attention this week. Tax-exempt yields remain relatively low because of a simple supply-demand equation. April's new-issue sales didn't help on that front. By the way, May's print edition will be mailed to arrive late this week.
(Apr. 30) -- Tax-exempt yields were down a little bit again this week as new-issue sales slowed and demand remained steady. A local triple-A school bond came to market and only yielded 2.98% in 10 years. Ouch! To see the details on that deal and a summary of the week's activity, go here.
(Apr. 29) -- Some airports aren't out of the woods in addressing credit rating challenges, even with the recession ending. More airline consolidation is the next trend to watch. In 2009 the par value of municipal bond trades plunged, but that is deceptive because a certain sector (variable-rate securities) caused the bulk of the decline.
(Apr. 28) -- We might be a little light on updates today due to other tasks. As a result, we are throwing in a yield example just to give you an idea of what a small issue paid the other day. We also throw in an example of "non-traditional" buyers who are targets for taxable Build America Bonds.
(Apr. 27) -- Yesterday we mentioned in this space that the California Department of Water Resources plans to sell $2 billion of power supply revenue bonds next week. Fitch Ratings just upgraded these bonds. The details are now here. Certain Hesperia Redevelopment Agency tax allocation bonds have been downgraded by Moody's Investors Service. Assessed valuation declines are the culprit.
(Apr. 26) -- The deal from Stanford University we flagged because of its AAA rating finally was priced. The 30-year yield wasn't much higher than a 10-year Puerto Rico power revenue bond priced last week. New-issue activity won't be very robust this week. Triple-B bonds from Childrens Hospital Los Angeles are still on deck. Carmel's school district plans to sell $15 million of AAA general obligation bonds, and Burlingame's elementary school district will take bids Thursday on $17 million G.O. debt (AA+). A San Marcos school district also plans soon to sell lease revenue bonds. "Inflows" into municipal bond funds remained lower last week, following a week of "outflows."
(Apr. 23) -- The tax-exempt market saw yields drop again this week. We talk a bit about bond insurer AGMuni in our summary of the week's activity here.
(Apr. 23) -- California Treasurer Bill Lockyer put out a three-page release about the credit default swaps market and municipal bonds. He decided not to comment on our questions posed in the Bond Advisor's April print edition. A wise choice, perhaps, to avoid shining light on the state's own hypocrisy. Elsewhere in the market, a three-notch South Gate downgrade occurred for the reason we suspected. Speaking of downgrades, Fitch Ratings had a lot more of them in the public finance sector in 2009.
(Apr. 22) -- The BBB+ power revenue bond we featured recently paid 4.91% on an 18-year maturity.
(Apr. 21) -- The bankrupt Palm Drive Health Care District is closer to exiting bankruptcy thanks in part to a planned COPs sale. U.S. states also may turn to more borrowing because of lingering budget gaps. A California city's pension obligation bond was downgraded by three notches but we haven't seen the reason yet.
(Apr. 20) -- We enjoy learning about various nonprofit organizations that can benefit from tax-exempt conduit bonds. This institute helped breathe new life into the downtown Los Angeles Arts District. Reading about that issuer will take your mind off our state's housing market, which isn't doing any favors for one issuer's home mortgage bond credit rating. Some state issuers are happier about their credit ratings thanks to a Moody's "recalibration." California is all alone among states in the single-A category.
(Apr. 19) -- State of California general obligation bonds are now rated A1 instead of Baa1 after Moody's Investors Service began "recalibrating" its municipal ratings to a "global" scale that gives munis more credit for lower default risk. We discussed "recalibration" at length in our April print edition and there isn't much more to say, at least not yet. Puerto Rico G.O. bonds moved to A3 from Baa3.
(Apr. 19) -- The new-issue tax-exempt market will be led this week by the Los Angeles Unified School District ("low" double-A), but other triple-B deals will offer some extra yield. A separate issuer, the City of Los Angeles, was downgraded on Friday by Fitch Ratings. However, after Fitch recalibrates municipal bond ratings on April 30, many of the Los Angeles ratings will be back at the level before the downgrade occurred. So the city's G.O. bonds were AA- last week, Fitch then cut them to A+ on Friday, and on April 30 they will be AA- again after "recalibration." On Friday a handful of new bond deals priced after we ran our weekly review. We discuss the yields here, and mention a taxable BAB comparison as well.
(Apr. 16) -- The municipal market saw more buying interest this week, pushing yields a little lower after recent increases. There weren't any gigantic new issues, but the pricings that occurred featured a decent mix of ratings, bond insurance, etc. See our summary of the activity here, including possible new sales looming next week. In other news, a Los Angeles utility has approved a rate increase to end a recent city fight.
(Apr. 15) -- Well, another April 15 rolls around. We say pause and give thanks for one thing. Meanwhile, someone might want to give thanks if the City of Los Angeles and its utility can escape a self-inflicted mess. The ball is in the utility's court again. Speaking of budget problems, one community college district gets a rating warning because it still needs to adopt an operating plan for the current fiscal year. We expect it will do the right thing.
(Apr. 14) -- The Puerto Rico Electric Authority will sell more power revenue bonds soon. We remind you of its strengths, despite a lower credit rating.
(Apr. 13) -- California's municipal bond market is often lucky to see even one competitively-bid debt sale on any given day (or any given week for that matter). Today there are three such sales of local general obligation bonds.
(Apr. 12) -- On March 31 we mentioned a letter from California's treasurer that seemed intended to chide some of the state's bond underwriters for participating in a "credit default swap" market on California general obligation bonds. Our April print edition ponders a bit of hypocrisy based on actions by past state treasurers. Speaking of the state, one of its issuing entities will be among the bigger sellers of new bonds this week. Municipal bond funds stopped their "outflows" at a one-week streak, with inflows resuming again. Vanguard Group climbed to the top of a list of big institutional holders of municipal bonds.
(Apr. 9) -- Maybe it was spring break fever, but new-issue activity seemed restrained in recent days. Or maybe higher tax-exempt yields are keeping issuers on the sidelines. In any event, we still review the week here.
(Apr. 9) -- Long-time readers know what we have said for years about certain types of municipal bonds and their resilience during an economic downturn. It never hurts to back up our claim with statistical background. We all know what the economic downturn has done to the state's finances (along with its addiction to spending). At least there is another sign the tide is turning, based on general-fund revenue. Speaking of essential-purpose bonds, one water authority stepped up to the plate for a big rate increase. The move will reassure bondholders.
(Apr. 8) -- Tax-exempt bond investors who worry that a new federal tax would replace the U.S income tax certainly don't have to worry about this proposal. Next week, the State Public Works Board plans to sell $400 million of tax-exempt bonds. There will also be a smaller portion of taxable Build America Bonds. Fitch's recent "recalibration" affects this bond sale. The City of Los Angeles has received a new downgrade warning from S&P.
(Apr. 7) -- Early this morning Moody's Investors Service downgraded $3.2 billion of Los Angeles municipal bonds by one notch (the G.O. debt went to Aa3 from Aa2). The action wasn't a surprise and we reflect on Los Angeles here. The city isn't the only issuer facing change after the sharp economic downturn and we also flag some two-notch downgrades. Even municipal bond funds saw a change recently, with the first weekly outflows in more than a year. It had to happen eventually.
(Apr. 6) -- Our April print edition that was just mailed discusses "The Great Capitulation," though some refer to it as credit ratings "recalibration." Fitch Ratings started its adjustments, which boosted California general obligation bonds to A-minus from BBB. Speaking of recalibration, we wonder if a one-notch downgrade of San Joaquin County will in essence be reversed when Moody's changes many municipal bond ratings. In any event the county is now one-notch weaker relative to its peers. Since Stanford University is a triple-A bond issuer, we will credence to its student "experts," especially when they knock the State of California for its underfunded public pension system.
(Apr. 5) -- Stanford University won't have trouble enticing "high-quality" buyers to its bond sale this week. Certain San Diego bonds will offer more appealing yields, though. Due to the way March ended in the middle of the week, our April print edition isn't being mailed until April 5. You'll have it in a handful of days.
(Apr. 2) -- Tax-exempt yields didn't change much this week after a recent jump. A state-related issuer paid the usual whopping yield penalty for having "California" in its name. Another issuer with "California" in its name wasn't penalized, but it helps when your credit rating is double-A instead of triple-B. A triple-A issuer plans to sell new bonds next week and you can see who it is in our weekly review.
(Apr. 1) -- About $100 billion of municipal bonds were sold across the U.S. in the first quarter. Even so, tax-exempt bond sales dropped by almost one-fifth. Go here to see why. Here is another statistic worth pondering: In the fourth-quarter of 2009, overall tax receipts for local and state governments were at the highest level ever for one quarter, according to the U.S. Census Bureau. Meanwhile, Standard & Poor's issued a correction on a recent Hesperia Series 2005A tax allocation bond downgrade. The downgrade is only to BBB-, not double-B.
(Mar. 31) -- California Treasurer Bill Lockyer would like to hear from some bond underwriters, specifically about the extent they participate in a swap market that assesses the risk of a state default. If they want to play both sides of the fence, is the swap market correctly assessing this risk? Maybe investors don't think certain state-related issuers will default, but they still want to penalize California for its fiscal mismanagement. This yield on a new issue (6%-plus) proves that again. We also ponder an interesting new U.S. law that in essence takes away a certain type of municipal bond in favor of letting the feds handle such financing in the future. There is probably a lot more going on here than meets the eye, reflecting a certain mindset that the federal government needs to run everything.
(Mar. 30) -- Most if not almost all cities will try to avoid redevelopment bond defaults to sidestep staining their overall credit. A downgrade in Lancaster illustrates how this city is transferring money from other project areas to protect central business district payments.
(Mar. 29) -- A handful of years ago the Bond Advisor wrote about the charter-school movement and the credit factors for this interesting sector. This sale was interesting indeed because of the yields. While the yields won't be as enticing on some new sales this week, investors who favor higher credit ratings will like the University of California and Long Beach Harbor offerings. The money flowing into tax-exempt bond funds slowed down last week to the lowest level since January 2009. Still, the "inflow" run has been remarkable.
(Mar. 26) -- Tax-exempt yields finally jumped after hovering in a narrower range recently, with the impact most apparent on maturities of a dozen or so years and less. That didn't deter several new bond sales in California's new-issue municipal market. We recap recent activity in our weekly review.
(Mar. 26) -- Fitch Ratings plans in April to put its municipal bond ratings on a "global" scale and reward muni issuers for their lower default history. The result will be massive upgrades. State of California G.O. bonds will rise to A-minus from BBB under the plan. And, since most "traditional" muni bonds don't default in the first place, maybe it's not all that newsworthy that a Wisconsin regulator seems to have taken a step to protect municipal bondholders. This is what the regulator did. Looking for a solid revenue bond? Take a look at this single-A offering by a prominent city.
(Mar. 25) -- It is still a seller's market for tax-exempt bonds, especially for issuers rated double-A and higher. The Los Angeles Airport Department can tell you it did better yesterday than in November.
(Mar. 24) -- Just what states needs, another credit cloud. But that is what happens when a decision is made in D.C. for the government to be everything for everybody. That isn't a "political" comment, but just a statement of ugly fiscal reality. We also briefly mention an interesting bond sale by a charter-school manager.
(Mar. 22) -- A Vallejo bond unaffected by the city's bankruptcy filing received a tardy upgrade the other day to BBB from B. After we put out our weekly review early Friday, a handful of new deals priced the same day. We mention the tax-exempt yields and also comment on the taxable Build America Bond portions. One measure that investors still like tax-exempt bonds: the "inflows" into municipal funds.
(Mar. 19) -- In a week when tax-exempt yields didn't change much, there were plenty of new bond sales in California's new-issue municipal market that provided "benchmarks" for certain rating levels. Quite a few deals fell in the A+ range. We discuss this topic and upcoming sales in our weekly review.
(Mar. 18) -- The State of California plans to sell taxable Build America Bonds next week. Income-oriented investors better do their math before they favor taxable munis over tax-exempt bonds. Speaking of the state, a "special session" of the legislature to address the deficit ends by fizzling out. Did anyone really think it would end any other way? (Short answer: No.)
(Mar. 17) -- The bigger deals of the week are wrapping up today. We couldn't resist comparing the state university system yields with California's recent G.O. sale. A high school district that plans to sell $100 million of G.O. bonds this month was downgraded one notch. Another issuer that was downgraded last month received a warning from a second rating agency. Both these items are located here.
(Mar. 16) -- Moody's Investors Service announced today that it will "recalibrate" its municipal bond ratings to a "global rating scale," a move that will raise ratings as much as three notches." That means an A2 rating might rise to Aa2. While this change will raise the ratings on many existing bonds, we still think investors will lose something of value. On average, local and state general obligation bonds will rise by two notches, Moody's said.
(Mar. 16) -- Standard & Poor's is on a roll when it comes to downgrading tax allocation bonds of smaller rural cities to double-B. A Hesperia Redevelopment Agency issue became the latest to fall. Elsewhere in "general" news, we mention continuing talk about extending taxable Build America Bonds. Some kind of proposal to extend this federal subsidy seems certain to go forward, but the terms vary. We also decided to say a little more about Vallejo.
(Mar. 15) -- Standard & Poor's today downgraded its underlying rating on $4.815 Vallejo Series 1999 certificates of participation to C from B, citing the city's proposed bankruptcy workout plan to suspend payments on these COPs for three years. You better keep your facts straight because this downgrade applies to the underlying rating. MBIA, the bond insurer, helped cover the January 2010 payment on these COPs when the city reduced its interest payments. We have a little more to say about this here.
(Mar. 15) -- Happy Monday, spring is around the corner. It's also a happy week if you like looking at new issues, there are plenty lined up in California's municipal bond market. A deal that priced on Friday got us to thinking, what would the yields have been if AGMuni wasn't backing the issue? Even with bond insurance this issuer borrowed at rates similar to those for the state's sale last week. Every once in awhile we also like to mention the yields on capital appreciation bonds in the new-issue market, just as a "for your information" update. We also mentioned a one-notch downgrade for a health group after two rating agencies took action. However, the bonds remain single-A.
(Mar. 12) -- The California municipal bond market is getting some legs and next week's new sales will pick up markedly. Also waiting in the wings is a Los Angeles Department of Airports senior revenue bond issue of more than $850 million. This deal could be offered in about a couple weeks though we haven't been given any specific date.
(Mar. 12) -- All this week's attention was on the bond sale by Goliath, also known as the State of California. When it came to getting the lowest interest rates for taxpayers, however, a few higher-rated "Davids" beat Goliath again. See our weekly review for a brief overview of recent activity, and read to the bottom of the March 12 entry to see which new issues are looming in California's municipal bond market. There will be plenty of variety in the days ahead. Tax-exempt rates didn't change much in recent days, though they ticked a little lower thanks to continuing good demand.
(Mar. 12) -- While it doesn't always make them as efficient as they could be, some municipal bond issuers certainly are strong because of monopoly-like positions. It helps when they provide "essential" services. An upcoming deal by a Puerto Rico issuer features these traits, but it won't be to everyone's taste because of lower credit ratings. Yet another smaller redevelopment agency received a multi-notch downgrade from Standard & Poor's, this time in Riverbank. (We saw this trend in the early 1990s, too.) Just so you aren't too bummed out by downgrade news, how about some multi-notch upgrades of a few solid waste bonds?
(Mar. 11) -- California lowered yields on its $2.5 billion general obligation bond sale in Thursday's final pricing, compared with preliminary levels during the retail order period. See the details here.
(Mar. 11) -- The six-notch downgrade we mentioned earlier today of the Desert Hot Springs tax allocation bonds was in fact for the reason we suspected: "significant" assessed value declines, according to Standard & Poor's.
(Mar. 11) -- Helped by a two-day "retail" period that generated $1.38 billion of requests, California is now selling a total of $2.5 billion of general obligation bonds as bigger institutional buyers place their orders today. (The original size was $2 billion.) A 30-year maturity was offered at a yield of 5.68% today. Some yields are dropping by small amounts from the preliminary retail levels because of the good demand. While it didn't get much attention yesterday amid the bond sale, a monthly report by California's controller showed that the state's tax receipts rose above the governor's fiscal 2011 budget estimate by 8.7% (or $480 million) in February. That is the third month in a row revenues topped projections.
(Mar. 11) -- Certain Desert Hot Springs Redevelopment Agency tax allocation bonds have been cut to BB from A by Standard & Poor's. That change doesn't affect all the city's TABs, as we explained in this update. Speaking of S&P, last week the rating agency updated its public finance (municipal bond) default statistics from 1986 to 2009. Here is our brief overview of the report. As long as we are talking about S&P, why not add another brief comment about the wave of municipal bond upgrades we keep seeing by this rating agency.
(Mar. 10) -- The two-day "retail" period for California's G.O. bond sale didn't quite reach the $1.5 billion we referenced below, but orders did total a healthy $1.38 billion.
(Mar. 10) -- California's "retail" order period for its general obligation bonds is drawing plenty of buyers, and we're wondering if $1.5 billion is doable once the two-day period ends today. It was $200 million short of that number earlier today with a few hours to go (some of those orders represent oversubscriptions for certain maturities). The yields are just high enough to catch buyers' attention, and the state is benefiting from selling into a favorable tax-exempt market right now. Our Research page looks at some comparative yields.
(Mar. 10) -- The downturn affecting the area around the state capital also has dragged the rating a notch lower on $1.07 billion of sanitation district debt. A higher-rated alternative to California's G.O. sale happened to price yesterday and we talk about the yield difference between the two here. If it true that misery loves company, then California can take comfort in the fact that its role model for fiscal irresponsibility, the State of New York, is facing a big fiscal mess. What a surprise, a proposal would have New York borrow to pay for operating expenses. Sound familiar?
(Mar. 9) -- The preliminary yields for the California G.O. bond sale include 4.24% tax-exempt in nine years. Even if you're in a lower 28% federal income tax bracket that's a Taxable Equivalent Yield of roughly 6.5% for a California resident. San Francisco priced double-A G.O. bonds today and a nine-year maturity yielded 2.89% tax-exempt.
(Mar. 9) -- As California starts to take retail orders today for its G.O. bonds, there are several media reports about the governor vetoing a deficit-reduction ploy on prison spending. He did the right thing. We talk about that veto and also remind investors about a helpful cash management bill that we doubt the governor will oppose. Elsewhere in the market, we flag yet another higher-quality deal in the new-issue hopper.
(Mar. 8) -- S&P's fuller report on the Hercules downgrade discussed below (March 7)includes a paragraph worth considering. Go here to see why. In an update on something we last discussed in November, an Oceanside wastewater rate increase prompted S&P to remove the credit rating from a list for potential downgrade.
(Mar. 7) -- We talked about rating changes worth monitoring in our March print edition. A six-notch downgrade certainly gets our attention, and the details are here.
(Mar. 6) -- Our March print edition explains exactly how the State of California allocates general fund revenue for bond payments, important information every investor should know. We continue an informal series on bond portfolio ideas if inflation and/or rising interest rates are your concern. Given continuing media headlines about municipal default and bankruptcy risk, we try to provide some perspective. We also discuss some municipal bond default history over 40 years. We also mention the "bombs falling on the horizon" for a long-cherished advantage for buying municipal bonds. Subscribe now to get the print edition and hear about expanded coverage plans in our April 2010 edition.
(Mar. 5) -- We rarely post such a lengthy commentary for "free" but will do so ahead of California's upcoming general obligation bond sale.
(Mar. 5) -- Municipal bonds continued to rally this week, pushing tax-exempt yields lower. That might be news to Sacramento County, which paid higher yields over recent downgrades. How high? The county's five-year maturity paid a full two percentage points more than a water district's new sale. Ouch! See the details in our weekly review.
(Mar. 5) -- Health care costs will be a growing problem for local and state governments over the next half century, a new report says. Anything causing stress for bond issuers is also worth monitoring by bond investors. Speaking of stressed-out bond issuers, California's general obligation bond sale will get lots of attention next week. We list even more higher-rated alternatives for investors seeking diversification. However, as our March print edition explains oh so clearly, even "conservative" investors can buy the state's G.O. debt. Still, this example is worth pondering before next week's state sale.
(Mar. 4) -- Our March print edition discusses the important "cushion" for California general obligation bonds. Someone asked about the "retail order" terminology. Here is an answer. Due to work-related travel, our updates on this site have been a bit "light" yesterday and today. We'll make up for it later today or tomorrow. In market news, S&P has downgraded the Hayward Unified School District.
(Mar. 3) -- If you hold municipal bonds insured by the "old" MBIA, you know that in the past they have been moved into a segregated company called National Public Finance Guarantee Corp. We explain here why it would be good for municipal bondholders if MBIA prevails in court over its decision to move its public finance exposure into this separate subsidiary.
(Mar. 2) -- Investors seeking higher-rated municipal bond deals will find some next week, just before the State of California sells its lower-rated issue. The Mill Valley School District was just upgraded to AAA by one rating agency, and San Francisco will sell double-A bonds next week. A research institute founded by Andrew Carnegie is also lining up a bond issue through a California authority; the bonds are rated Aaa by Moody's, though we're not sure of the sale date yet. Last week we mentioned a downgrade by S&P of a Rohnert Park 2005 issue, but didn't have a reason. Here is the explanation.
(Mar. 1) -- The City of Inglewood's 1991 certificates of participation were upgraded to BBB+ from BBB- by Standard & Poor's. See the rationale here.
(Mar. 1) -- Remember when the Bond Advisor said in 2008 that you should even tear the copper pipes out of your home to raise cash for buying municipal bonds? Our point at the time was that municipal bonds were a screaming buy. Famed investor Warren Buffett agrees, and he regrets not buying more munis than he did. His comments in the annual report of Berkshire Hathaway Inc. also talk about a "climate of fear" being a friend of investors. In other market news, tax-exempt bond sales in the U.S. dropped last month over February 2009. We give one reason. Our March print edition was mailed the other day and it even includes comments about a city in Georgia as a warning for California municipalities and their management of certain liabilities.
(Feb. 26) -- Tax-exempt yields were a bit lower this week. In the new-issue market bond insurer AG Municipal guaranteed several new issues in California. This insurer (the former FSA) is going back to the "old" days of financial guarantors and limiting its risk to the municipal bond market. Some investors seem to like that idea. The AGMuni-insured deals get discussed in our weekly review. AG Municipal's parent had some good news to report yesterday on the earnings front. Stock investors seem more optimistic about the insurer's future, with shares now around $20. The 52-week low was $2.69 last March. Details about California's rescheduled G.O. sale were moved here. We also noted a two-notch downgrade of Rohnert Park sewer COPs yesterday.
(Feb. 25) -- California plans to sell a delayed $2 billion tax-exempt general obligation bond on March 11. We have moved the details here.
(Feb. 25) -- Moody's Investors Service affirmed its general obligation rating on the Sierra Kings Health Care District, which is in bankruptcy. Go here to see why. Elsewhere in the market, Assured Guaranty Ltd. asked Fitch Ratings to withdraw its grades on the company's bond insurer subsidiaries. It isn't because of a problem with the ratings, but rather reflects a policy change by Fitch. San Francisco, an issuer with double-A general obligation bond ratings, plans to sell such debt in March. Fitch Ratings has changed the city's outlook to "negative" from "stable."
(Feb. 24) -- California postponed its $2 billion general obligation bond sale after the legislature stalled on a cash management bill the state treasurer wants in place. Late yesterday we noted that Los Angeles general obligation bonds were downgraded a notch to AA- from AA by Standard & Poor's, mirroring a similar move by Fitch Ratings in November. The city's other debt that was rated AA- fell to A+.
(Feb. 24) -- The Bond Advisor was the first to point out that all this industry gushing over taxable Build America Bonds could eventually pose risks to tax-exempt debt in unexpected ways. A friend in the industry just pointed us to a new proposed bill in the U.S. Senate that would do away with tax-exempt bonds altogether. We don't think it has a chance of passing but the fact the idea gets floated at all is troubling.
(Feb. 23) -- In 2010 local and state governments will see lingering financial stress. Those that want to can protect credit ratings with good "management," Fitch Ratings noted in a report on tax-supported debt. The economic downturn raises the risk for more defaults or Chapter 9 bankruptcies, at least compared to historic standards, but in reality these events will remain rare for traditional municipal bond issuers, Moody's Investors Service said in its outlook for 2010.
(Feb. 22) -- Beside the tax-exempt sale planned next week (see item below), the State of California also expects to sell taxable G.O. bonds, perhaps late in March. Next week's sale will be unusual if it sticks to tax-exempt debt and leaves out taxable BABs, not that smaller investors would complain. In other news from recent days, the Palmdale Water District has been removed from a downgrade warning list by S&P. See why here.
(Feb. 19) -- The State of California has scheduled a general obligation bond sale of "up to" $2 billion on March 4. So far we see no sign it will include taxable BABs (that could always change). Other sales by the California State University system and the Public Works Board also loom in March, according to the state treasurer's office.
(Feb. 19) -- The City of Stockton has just had certain certificates of participation downgraded to BBB+ from A by Standard & Poor's. The downgrade applies to COPs secured by net revenues of the city's wastewater enterprise.
(Feb. 19) -- Burbank has put in its time as a butt of television jokes, but the city can now boast about a triple-A issuer credit rating. Take that, Hollywood! Things aren't looking as good in Sacramento County after Fitch Ratings joined the downgrade bandwagon.
(Feb. 19) -- Watch your heads, the sky is falling on the municipal bond market. Since early February a wave of stories has been growing ever higher thanks to Chapter 9 bankruptcy talk in Harrisburg, Pennsylvania. These stories also throw in some other troubled examples using projects that were hardly "traditional" municipal bond credits in the first place (the monorail in Las Vegas, anyone?). The conclusion from all this, according to these stories? The muni "threat" is upon us, run for the hills. Once again, some of these stories start with and touch upon a valid point: local and state governments are in fact facing some very tough times. But from there, however, they reach some stunning conclusions, with a "quote" from some "pundit" high up in the story to make it all come together. Haven't we discussed "headline risk" a lot already? But we do so again here. Confuse this risk with actual credit and default risk at your own peril.
(Feb. 18) -- One of our recent print edition stories noted that debt service costs are nothing compared with what state and local governments have to pay for certain public employee benefits. A new report notes that U.S. states were recently running $1 trillion behind on funding certain promised retirement costs. Elsewhere in the market, Moody's notes that everything isn't hunky-dory in Los Angeles, but that also isn't a surprise.
(Feb. 17) -- Sacramento County was downgraded by Moody's Investors Service, a postscript to our item below about the S&P rating changes. Details are here in an update to our previous blurb.
(Feb. 17) -- Sacramento County gets some news no issuer wants before a planned sale: a downgrade. Of course, S&P cites a good reason for the one-notch cut. Speaking of planned sales, a few $100 million-plus deals will be in the market soon, including a couple for a private and public university. (Of course, we still love smaller bond sales, too.) Though it is a tougher operating environment for redevelopment agencies when property values decline, some existing bonds still can get good news.
(Feb. 16) -- After everyone in the municipal bond market took a day off to observe President's Day, the new-issue market will feature a handful of deals this week. The Los Angeles Unified School District G.O. sale will be the biggest, though dominated by taxable BABs. Tustin's school district also could price a G.O. issue, including almost half as taxable BABs. Speaking of school bond sales, we flag a couple recent pricings just to discuss yields tied to AG Municipal bond insurance. We also flag a couple other school new-issue examples to throw in a mention about capital appreciation bonds. Every once in awhile we also like to flag statistics about "inflows" for municipal bond funds. They keep taking in money; tax-free money market funds aren't so lucky.
(Feb. 12) -- Tax-exempt yields were relatively steady this week. In the new-issue market our weekly review looks at various yield examples, including one 10-year tax-exempt bond that yielded 2.99% and another yielding 4.87%. Of course, they don't share the same credit characteristics.
(Feb. 12) -- Moody's Investors Service updated its municipal bond default history. On deals it rated there were only three general obligation bond defaults since 1970. We also mention a taxable Build America Bond sale because the yield was so "low." Perhaps taxable buyers appreciate the low-default risk of munis vis-a-vis corporate bonds and are willing to accept such low yields. Speaking of taxable BABs, one proposal might curtail tax-credit muni bonds we dislike, but expand taxable BABs in place of them. We call that a lose-lose deal.
(Feb. 11) -- The San Bernardino County Flood Control District sold $103.78 million of judgment obligation bonds in 2007 to pay for a settlement with a developer. Yesterday two county officials were charged with accepting bribes and corruption for helping approve the settlement. We discuss here why that shouldn't affect the bonds, no matter how the allegations pan out in court.
(Feb. 11) -- California Controller John Chiang made some comments that, in our view, completely ridicule those who talk about a state bond default. In fact, his comments pretty much echo our February essay about the state's general obligation bonds and people who say states can file bankruptcy (they can't). The investors who want to listen to kooks instead of the Bond Advisor (or the Controller) can keep buying money-market instruments and earn virtually zero.
(Feb. 11) -- California's January general fund receipts were $1.28 billion, or 18.6%, higher than the governor's fiscal 2011 budget estimated. The state controller called this a "positive," but warned state officials about getting "lulled into a false sense of security."
(Feb. 10) -- We often note that tax-exempt yields for higher-rated new issues are "low," at least relative to the spread you can get on some single-A municipal bonds. As an example from a new sale yesterday shows, the Taxable Equivalent Yield still can look good even if you're in the 28% federal income tax bracket. It just depends on your benchmark for comparison. Obviously the TEY looks even better for higher brackets. What is California's "actuarial unfunded obligation" for health and dental benefits for state retirees? A new report says $51.8 billion, California's controller says. We usually don't mention certain remarks by the Federal Reserve Board's chairman because they get plenty of attention elsewhere. But once in awhile a quick mention is worthy if it ties in to our recent commentary.
(Feb. 9) -- An interesting fact: Municipal bond sales across the U.S. rose 5.1% in 2009. In California they jumped 36.8%. The state's massive bond sales drove some of that increase. Glendale, a city with "very low debt levels," saw its issuer credit rating boosted to AAA by Standard & Poor's. Last week we mentioned the big Los Angeles Unified School District G.O. sale. It will price next week.
(Feb. 8) -- As planned, our February print edition mailed Feb. 6. In March we'll be back to a mailing timed to the start of the month. February's edition discusses a tried-and-true approach to guarding against rising interest rates, though some smaller investors still balk at this strategy. We also make some audacious remarks about buying the state's bonds. So audacious, in fact, we included an insert to clarify our hyperbole. Once and for all, we discuss one risk states don't face in the municipal bond market. There is also an "example" TEY table for 2011 assuming federal taxes rise on higher-income brackets. We mention another item about a municipal bond market "bubble" here.
(Feb. 5) -- Tax-exempt yields dropped this week. Our weekly review discusses recent new-issue pricing trends, including a school district general obligation bond that will pay you 4.13%, but only if you go out to a 15-year maturity. A single-A issuer paid 4.01% in 10 years. A bond insurer has lost its AAA rating, but this newcomer had already disappeared from backing new municipal bond deals. An upcoming sale of water revenue bonds features a triple-A rating on its own credit. Only one-fifth of the deal will be tax-exempt, though. Bonds that financed an important rail infrastructure project have been downgraded, with a decline in cargo traffic hurting revenue.
(Feb. 3) -- The Los Angeles Unified School District may soon sell up to $2.2 billion of general obligation bonds, according to a rating agency. Of course, wouldn't you know it, two-thirds of the sale might be offered as taxable Build America Bonds.
(Feb. 3) -- This week seems relatively slow for new tax-exempt bond sales, at least based on pricings we expect. A power authority is lining up a triple-B sale of electric system bonds that are tax-exempt, even though the issuer isn't within U.S. borders. Update: We moved an item that was posted on this page yesterday (S&P downgrade of Pajaro Valley Water Management Agency 1999A certificates of participation to BB from BBB) to another page and have now added S&P's reasoning for the change.
(Feb. 2) -- The federal government in 2011 wants to give some investors about seven-tenths of a percentage point more in Taxable Equivalent Yield. You don't have to do anything except maybe grit your teeth when you see why. At the other end of the spectrum, the bankrupt City of Vallejo wants to give a certain investor less tax-exempt yield for a time. That makes us grit our teeth. Recent rating agency commentaries on the nonprofit hospital sector point out the importance of monitoring trends that affect the forest. Still, some individual trees are healthier than others.
(Feb. 1) -- President Obama new budget is expected to propose making taxable Build America Bonds a permanent feature of the municipal market. However, some issuers might find them less attractive because the federal subsidy for interest costs would be reduced. In a related trend, new municipal bond sales set a record for the month of January. However, tax-exempt sales actually declined last month from January 2009. This reduction in tax-exempt volume also keeps a lid on tax-exempt rates. Of course, if you're a lower-rated issuer, there isn't much of a "lid" on what you must pay to attract buyers, as this recent hospital district pricing shows.
(Feb. 1) -- Our second "regular" January print edition was mailed at the very end of January. Our regular February edition will be mailed Feb. 6.
(Jan. 28) -- Puerto Rico's sales of sales tax bonds showed that one trend from 2009 lives on in 2010. You can pick up plenty of yield on single-A versus double-A new issues. Our examples show the difference this week. Or, a warier investor could stay "shorter" on the Puerto Rico sale (six years) and still top the yields on new 10-year double-A maturities. Of course, it isn't as easy to find some longer-maturity tax-exempt bonds. A couple more issuers are having a love affair with taxable Build America Bonds.
(Jan. 27) -- We have said all along that taxable Build America Bonds are popular only because the federal "stimulus" program is overly generous in subsidizing 35% of local interest costs. The Congressional Budget Office confirmed our suspicion in a new report that says the Feds underestimated the tab. Elsewhere in the market, we usually wouldn't flag a new bond sale just because it involves fixed-rate debt. But this issuer caught our eye because it has lots of variable-rate bonds outstanding, making its fixed-rate sale noteworthy. The issuer is also high quality, with COPs earning an AA+ grade. Puerto Rico is wrapping up its single-A sales tax bond pricing; "retail" buyers liked the shorter maturities, and the demand also reflects the fact the commonwealth's debt is state and federal tax-exempt for buyers across the U.S.
(Jan. 26) -- Vallejo City Unified School District G.O. bonds and COPs were upgraded a notch by Standard & Poor's. This is worth mentioning because we have stressed in the past that the school district is a "separate" entity and not part of the City of Vallejo's bankruptcy filing. In a new report, Fitch Ratings confirmed a negative rating trend for municipal bonds in the fourth quarter of 2009. Even so, 87.3% of its muni ratings had "stable" outlooks at the end of 2009. Speaking of stability, don't forget to consider certain non-governmental issuers when pursuing diversification. We give one example in citing an upcoming tax-exempt bond sale by Pepperdine University.
(Jan. 25) -- A report by Moody's Investors Service on 2009 rating trends won't surprise investors, but it does show how the recession affects the muni market. It also probably won't surprise investors that a single-A COP, even with bond insurance, yields more than a double-A water revenue bond. Still, a savvy income-oriented investor might conclude the school district COP is a good bet. We also explain that our list of upcoming sales is getting updated again, but add a plea that market participants let us know when new issues get delayed.
(Jan. 22) -- While the yields won't be anything to write home about, a handful of new issues next week will meet the need of safety-oriented investors who like bonds with double-A ratings or higher. Puerto Rico also plans a big $1.4 billion bond sale with single-A ratings. Municipal bond funds continue to have an appetite for new issues because they are still seeing "inflows." Our weekly review mentions yields on this week's prominent double-A issuer.
(Jan. 21) -- A wind power project in Utah is driving a municipal bond sale in California, and the security is based on the strength of the utility participants. The looming 2010 stampede to sell taxable Build America Bonds keeps building (federal subsidy terms might change after 2010). Those of you who like to check a handy table of recent yields on new issues will be glad to know updates are returning. Our Upcoming Sales list, while blanked out temporarily as of Jan. 21, also will re-appear soon. We also have something to say about an unplanned trip to New York City, but you can read about that in our "regular" January print edition in just a few days.
(Jan. 20) -- Do you know which bond insurer dominated the new-issue municipal market in 2009? You probably know the answer but the statistic is still amazing.
(Jan. 19) -- A prominent utility is selling taxable debt soon and we are guessing it involves taxable Build America Bonds. This will be a big trend again in the municipal market during 2010, for better or worse.
(Jan. 18) -- The January "bonus" edition was mailed last week and will arrive for most of you after the Martin Luther King holiday. The January 2010 "regular" edition will follow in about a week, we've had a glitch with our annual Taxable Equivalent Yield tables. The "free" updates will resume on a regular basis beginning January 19.
(Dec. 23) -- Puerto Rico plans a large sale of sales tax revenue bonds in early 2010. The debt is rated four notches higher than the commonwealth's own G.O. bonds. Interest earned also is state and federal tax-exempt in all 50 states. A health care district that recently sought bankruptcy protection had its general obligation bonds affirmed by Moody's. The rating agency doesn't anticipate payment interruption on the G.O. debt. The real estate downturn continues to narrow the financial cushions for some redevelopment bonds, and we mention two more downgrades. We noticed late Tuesday that S&P changed a lot of San Diego ratings to a "stable" outlook from "positive." Not a big change, but we are awaiting the reason.
(Dec. 21) -- Late Friday afternoon Moody's Investors Service confirmed the Aa3 rating for bond insurer Assured Guaranty Corp. after its parent sold stock to bolster capital. Go here to see a brief update on why the outlook is "negative." In a separate Moody's rating action, a university that includes a chiropractic degree among its offerings has been downgraded to B3 from B1. On a happier note, municipal bond funds keep seeing "inflows." This December is far different from the "panic" of a year ago.
(Dec. 18) -- A ratio we often cite shows just how much municipal bonds have improved vis-a-vis U.S. Treasuries since a "panic" a year ago. Our weekly review mentions this trend again and also cites yields on a few new-issue pricings before the market slows down the next couple weeks.
(Dec. 17) -- Port of Oakland senior lien municipal bonds were downgraded to A2 from A1 by Moody's Investors Service. A slowdown in airport traffic and cargo shipping have meant less-than-expected revenue.
(Dec. 16) -- The long-suffering and bankrupt Valley Health System might be on the verge of a victory. A proposal to sell its remaining hospitals, and in the process pay off its tax-exempt bonds, was running far ahead at the latest count. The "yes" vote was 87%, which provides a big margin as any final mail-in votes get tallied in coming days. Elsewhere in the market, a new pricing offered a 2.90% yield on a 10-year maturity. That prompted us to mention the "yield" Grinch for seasonal effect. We also note a "new" credit rating assigned to older bonds and guess at a possible reason.
(Dec. 15) -- Using one type of measurement, Indonesia's bonds are considered safer than California's taxable general obligation bonds. Not that credit spreads are the only story, but for some reason this amused us.
(Dec. 14) -- The bill passed Friday by the U.S. House of Representatives to address financing regulatory reform might also help local and state governments get credit upgrades, even if they aren't well run. This issue keeps resurfacing but there is plenty of sausage-grinding to get before Congress comes up with a final bill. A new "story bond" we featured recently didn't carry a credit rating and ended up yielding a tax-exempt 5.55% in 10 years.
(Dec. 11) -- Tax-exempt rates continued to drop this week except for a reversal on Thursday. Our weekly review notes that some yields are getting "painfully" low again, with a few recent new issues paying less than 2% on five-year bonds. Ten-year yields around 3.35% aren't anything to write home about, either. We also include brief comments about the two Assured Guaranty bond insurers because their parent company's recent stock sale seemed to boost investor confidence in the value of the guarantees.
(Dec. 11) -- The nonprofit San Diego Natural History Museum secures $12 million certificates of participation that are now rated Caa2 by Moody's Investors Service after a downgrade from B1. Readers of our print edition will recall the City of Gardena's problems from a few years ago. Gardena's rebound from those problems is continuing and Standard & Poor's has rewarded the city with a two-notch upgrade. Separately, California's Controller released its report on the state's November cash receipts. General fund revenue was close to projections made this summer, coming in less than 1% short of expectations.
(Dec. 10) -- Since we don't like taxable municipal bonds offering tax credits (they are far more confusing than straight tax-exempt bonds), we only mention this for the record. California has a technical problem with the way it allocated a new type of municipal debt known as Qualified School Construction Bonds. Until the problem is fixed, Standard & Poor's has withdrawn 10 ratings it already assigned. None of the affected bonds had been sold. This debt is another stupid concoction of the federal "stimulus" bill. Speaking of stupid "stimulus" bill ideas, our griping about more taxable BAB sales continues. In addition, the outlook for more taxable sales is a bad sign for 2010, based on a survey of municipal underwriters.
(Dec. 9) -- Certain San Francisco redevelopment bonds were upgraded a notch, which usually wouldn't merit a mention. However, since our print edition recently noted that downgrades can be more common during a real estate downturn, a little good news never hurts. Bond insurer parent Assured Guaranty also is hoping for a little good news after raising more than a half-billion dollars to address rating agency concern. Elsewhere in the market, another high-quality California issuer just priced taxable Build America Bonds to take advantage of the federal giveaway masquerading as a "stimulus" program. Sigh.
(Dec. 8) -- Most of you probably couldn't care less about "faulty water meters" in Guam, but we find them worth a mention when they affect tax-exempt municipal bonds. Some of you also don't care about low-rated municipal bonds and you can skip this short update about a pending double-B debt issue. Also, Moody's Investors Service had something to say about the United States and its triple-A credit rating, which isn't in danger. Still, it is noteworthy when the topic even gets discussed, and it makes us thankful for those safe "essential" local municipal bonds.
(Dec. 7) -- We noted once again in December's print edition that public pension costs continue to get more attention for credit ratings. A potential ballot initiative to address this issue will no doubt start a war in 2010 with public employee unions. Meanwhile, municipal bond funds saw "inflows" for the 48th week in a row. What a turnaround from the overblown muni bond "panic" a year ago. Speaking of turnarounds, 2009 will end up being one of the busiest ever for new municipal bond sales across the U.S. California issuers will do their share to close out the year with several sales this week or next.
(Dec. 4) -- Tax-exempt rates are starting to slide again and probably will keep doing so later in December on yearend technical factors. In the new-issue market this week, you could get a tax-exempt 2.75% yield by only going out five years, or you could get the same rate on a 10-year bond. This tale of two issuers is discussed in our weekly review, along with other trends.
(Dec. 4) -- The Adelanto Public Utility Authority plans this month to sell $77 million of unrated bonds. This is known as a "story" bond and we discuss it briefly, the preliminary official statement is the best source. The basic idea is to sell fixed-rate bonds to get out of more expensive variable-rate debt.
(Dec. 4) -- Our printer made a mistake on a small number of December print editions for the newsletter. If you are missing page two (and have duplicate page threes) leave a message at the phone number on the newsletter and you'll get the corrected version.
(Dec. 3) -- More Virgin Islands tax-exempt "rum" bonds will be sold this month, this time on behalf of the Cruzan distillery. The last time these were in the market they paid about the same yield as a new California general obligation bond issue. This "rum" deal involves subordinate revenue bonds so yields will be a bit higher. Rum consumption is probably more predictable than the spending patterns of California's legislature. Pleasanton Unified School District G.O. bonds were downgraded a notch by S&P ahead of a new sale, mainly over lower reserve balances. The district remains a solid A+ credit.
(Dec. 2) -- We were reading the latest quarterly update from bond insurer ACA Financial Guaranty, which is still supposed to help cover any defaults on municipal bonds it backs as the company goes through its "run-off" process. We note an additional paragraph in Footnote 11 in the latest Sept. 30, 2009, statement. We are flagging that change just as an "FYI" since, in the future, investors will want to monitor how often ACA thinks it will have to step in for any defaults. Another bond insurer parent that has remained in far better shape, Assured Guaranty Ltd., plans a stock sale to boost capital. The move could help protect the ratings of its bond insurers at double-A levels.
(Dec. 1) -- About one-quarter of November's new municipal bond sales was driven by the refinancing of existing debt, thanks to lower tax-exempt interest rates. Meanwhile, we get to highlight yet another new bond sale with a double-B credit rating. Such sales are worth noting because they are uncommon. Also, our December print edition is being wrapped up and will go out in a day or two; the Thanksgiving weekend delayed the mailing just a little bit.
(Nov. 25) -- We are posting our weekly review early because of Thanksgiving, though we will add something on Friday if needed. Usually the market winds down mid-Wednesday. We wish everyone a Happy Thanksgiving. So does Beverly Hills after seeing the yields on its pricing this week. Our weekly review also flags some of next week's planned new issues.
(Nov. 25) -- Fitch Ratings cut $3 billion of Los Angeles bonds by one notch as the city struggles to align its budget with a hard-hit economy. It also raised a red flag about the need for pension reform at the city to cut future costs. Fitch also has downgraded the Modesto Irrigation District by one notch. Beverly Hills isn't facing the same credit rating problems as neighboring Los Angeles and its bond sale this week gave another good example of what high-quality issuers now pay to borrow. An item that appeared on this page yesterday about Standard & Poor's downgrading bond insurer Radian Asset Assurance to BB has been moved here.
(Nov. 24) -- State tax collections kept dropping in the third quarter of the same period in 2008, a new report says, down 10.7% overall. California's collections didn't decline as much as the U.S. average but a personal income tax figure shows why the state remains in a world of hurt. Meanwhile, assets at municipal bond funds continued to rise in the latest week, but at the slowest clip since April. Our occasional highlight of good-quality nonprofits selling tax-exempt bonds focuses on a boarding school that can boast of diverse alumni such as a former state treasurer and Thornton Wilder. In other news, Moody's Investors Service said it is considering a downgrade for a couple City of Inglewood bond ratings. The warning doesn't mean Inglewood is facing a growing budget crunch. Rather, Moody's said it can't make that assessment until the city catches up on releasing tardy financial statements.
(Nov. 23) -- In our weekly review posted Friday we mentioned various yield trends. We forgot to mention that one bond deal we previewed ended up yielding a tax-exempt 8% on a 20-year maturity. As you can imagine there was a catch, and it had something to do with the credit rating. A couple deals also priced Friday after we posted our weekly review and we decided to discuss those yields here, in part to show what a new bond with Assured Guaranty Corp. backing now returns. Just a reminder, back on Nov. 9 on our Research page we flagged the high-rated bonds being sold by a Beverly Hills financing authority. That deal is one of a handful being priced in California's municipal bond market during the slow Thanksgiving week.
(Nov. 20) -- This week's new-issue market featured a "good" high-quality state water bond and a "bad" California Public Works Board sale (it isn't a "bad" credit, just "bad" because its name is linked to the deficit-ridden state). In this case "bad" is "good" for the income-oriented investor, with the PWB paying almost two full percentage points more than a local G.O. school bond on a 25-year maturity. Our week in review highlights the "good" versus "bad" deals. If you only want to hear about higher-quality municipal bonds, the Southern California Metropolitan Water District is lining up a couple smaller issues. The yields will be "small," too. Yet another report has been released about the woes facing government finances, this time focusing on cities. The upshot: their budgets will remain tight in 2010 and 2011.
(Nov. 19) -- San Bernardino County has been taken off a Watchlist by Moody's Investors Service. The summary about this action is now here.
(Nov. 19) -- Based on the preliminary pricing for "retail," investors in a top tax bracket can earn a taxable equivalent yield (TEY) of more than 11% on a new 25-year California State Public Works Board bond. Even if you are in the 25% federal income tax bracket, the TEY is just shy of 10%. We also would encourage investors to write a thank you note to our state's political leaders for creating the budget carnage that produces such juicy returns. Institutional buyers will probably rough the state up a little more at final pricing for the Public Works bonds today. Elsewhere in the market, we provide updates on two bankrupt health care systems. One of them (Valley Health System) has just defaulted on November bond payments, but a looming election could fix the mess. The other one (Sierra Kings Health Care District) plans to meet December 1 principal and interest payments on its 2006 revenue bonds. We also mention an example of how the Internal Revenue Service "routinely" examines municipal bonds to make sure they meet federal rules for tax-exempt status. We also tell bondholders to "stay calm." In another update, Moody's has downgraded Merced County solid waste bonds to Baa3 from A3.
(Nov. 18) -- A preview of a new nonpartisan report expected today shows California facing another budget deficit of $21 billion in the current and next fiscal years. That gap is equal to about one-quarter of the current annual general fund budget. We ponder whether this is all a "new" deficit or in fact exposes rosy projections, false hopes, and gimmicks used to "close" past deficits. [Nov. 18 Update: The report is now out and it observes that some of the projected deficit reflects a failure to make good on other past gap-closing measures.] The good news is that the report is expected to say state tax collections are stabilizing. As usual, the problem is that there is never a serious effort to bring spending down to match actual revenue, which is why these huge deficits keep showing up. The timing of the report is probably great news for investors seeking higher yields on this week's State Public Works Board bond sale. In an effort to provide some good news, too, the Bond Advisor goes outside the municipal bond market and mentioned the climbing stock price for the parent company of two bond insurance subsidiaries. This is happening even after Moody's Investors Service recently downgraded one of the Assured Guaranty bond insurers. Even though bigger municipal bond sales get the media attention, we have added more than $600 million of looming new issues to our list in recent days. Many of those sales are around $50 million or smaller.
(Nov. 17) -- Declining assessed value because of the real estate downturn prompted Moody's Investors Service to downgrade three series of Ripon Redevelopment Agency bonds. In an earlier version of this summary we also noted that Standard & Poor's has lowered the rating on a high school district to single-A with a "developing" outlook from triple-A "negative." Now we have the details. S&P said it was correcting an "administrative error" because the rating is based on an insurance policy from National Public Finance Guarantee (formerly MBIA). We did know this district has been facing a budget crunch, based on a past state "negative certification," but the rating change was because of another reason. So we were right to say, "be careful about jumping to conclusions," in our earlier item. Speaking of budget crunches, we talk about "headline risk" and yet another report on state "fiscal peril."
(Nov. 16) -- San Juan Capistrano's general obligation bonds were upgraded by S&P to AAA before an upcoming sale of such debt. That is always a noteworthy accomplishment, more so when the economy has been weak. Palmdale Water District, which serves an area hit harder by the recession, had it certificates of participation dropped one notch to A by Fitch Ratings. The outlook is now "stable." Municipal bond funds are still gaining assets and tax-exempt money market funds keep seeing outflows. Just a reminder, we noted in last Friday's weekly update that this will be a busy week for new sales of California state and local municipal bonds. There will be a surge this week, a dramatic slowdown during Thanksgiving week, and then another surge of new sales in early December. Many recent new deals have been priced to sell and that will continue to be the case as dealers seek to avoid carrying too much inventory near yearend.
(Nov. 13) -- Assured Guaranty Corp., the bond insurer that still lands some municipal bond business, was downgraded late yesterday to Aa3 by Moody's Investors Service. Moody's also left the insurer under review for possible downgrade. Moody's said that "capital strengthening initiatives under consideration" for the insurer, if fully implemented, could help protect the Aa3 rating. Our longer item about the Assured Guaranty downgrade has been moved from this page to here. The chief executive officer of AGC's parent company said there are plans to protect the double-A rating. In a bit of good news, the former FSA kept its Aa3 rating with a "negative" outlook from Moody's. FSA is now called Assured Guaranty Municipal Corp. after being acquired by AGC's parent company. In other Moody's rating actions, the Los Angeles Department of Water and Power now has a "positive" outlook rather than "stable" on its water system revenue bonds. In contrast, state governors and budget officers don't see much room for revenue optimism because the rebound in tax collections will lag any economic recovery.
(Nov. 13) -- Following on last week's theme, we focus once again on lower-rated new deals that have to pay up. One issuer with a single-A rating plus bond insurance still paid a price (5% tax-exempt in 10 years). Of course, lease-revenue bonds aren't as popular with some investors. A health care issuer paid more than that, thanks to a triple-B rating. This week's big sale of four-year bonds to offset a state property-tax shift from local governments is generating criticism because of the way the "retail" pricing was handled (or mishandled, depending on your point of view). Next week's new sales calendar will be busy as deals get priced ahead of the short Thanksgiving week later this month. See our weekly summary here. "Generic" tax-exempt yields didn't change much this week: Pretty steady on the longer maturities, perhaps a bit lower on shorter maturities.
(Nov. 12) -- This week's sale from Palomar Pomerado Health didn't disappoint on the yield front. A six-year maturity yielded 4.80% and a 10-year, 5.75%. Of course, it is rated triple-B and that remains a tougher sell in today's market. We also include a brief summary of recent bond insurance news since there is still value in seeing the guarantees of the downgraded companies protected for municipal bonds. November 12 is the deadline for submitting bids to buy the bond-financed and bankrupt COPIA wine center property in Napa. This has a bond insurance angle, too, with ACA.
(Nov. 11) -- The score in the headline above has to be read like a golf result. The loser has the bigger number. As usual, the State of California is the loser. Or perhaps we should say state taxpayers are the losers; they are the ones paying for the state's fiscal follies. Yesterday the California Statewide Communities Development Authority sold $1.9 billion of revenue bonds carrying state backing. (We moved yesterday's story about the pricing to a new page, as the next sentence's link will show.) All the debt was packed into a four-year maturity and had to yield 4% tax-exempt to draw enough buyers. In contrast, a local California school district paid 1.9% on a new four-year bond yesterday. The state lost, but buyers of that 4% yield won. Talk about a screaming "buy"! It wasn't all bad news for California yesterday. The state's controller said October general fund revenue came in higher-thank-expected. Even that didn't provide much to cheer about because the governor noted that more budget cuts will be needed to deal with multibillion-dollar deficits in the current and next fiscal years. Bond insurer Ambac also doesn't have much to crow about, but at least it rarely has any municipal bonds defaults to cover. As we note here munis aren't the problem for Ambac's parent. The municipal bond market is closed on Wednesday for Veterans Day.
(Nov. 10) -- A regional center that serves the developmentally-disabled population in part of Los Angeles County will back bonds rated one notch below investment grade (Ba1) by Moody's Investors Service. Such regional centers don't rank as high as state G.O. bonds in payment priority and they received IOUs the past summer. In another upcoming sales, Long Beach's airport revenue bonds are rated investment grade, but at different levels, by three rating agencies. Go here to read about this "split" rating. We haven't mentioned municipal bond fund cash "gains" lately. They are still seeing more money coming in than going out, even though the intake has slowed recently. In a recent item we noted that $500 million of high-quality water bonds are coming to market soon. We didn't note that as much as $350 million might be those dreaded taxable Build America Bonds. There is growing talk that the taxable BAB program should be extended, regardless of our distaste for this unneeded federal giveaway ("stimulus") of taxpayer dollars.
(Nov. 9) -- The famed City of Beverly Hills will soon sell about $80 million of bonds to finance four city-owned water tanks. Times are indeed tough! Since when did Beverly Hills residents quit showering with bottled water? We mention the Beverly Hills sale in an item we moved from this page to here to mention a few upcoming higher-rated bond issues. There are plenty of double-A credits (or better) selling new bonds. Unfortunately you won't be writing home about the yields in exchange for getting "safer" bonds. Speaking of credit ratings, a recent Moody's Investors Service report says unfunded public pension liabilities could help influence the grades assigned to municipal bonds. A requirement that local and state governments provide better disclosure about this issue could help investors understand which entities are doing a decent job of addressing future retirement costs, and which ones are putting off a day of reckoning. Finally, this week's $1.5 billion bond sale to help local governments deal with a state property-tax grab will probably yield about 3% tax-exempt on the four-year bonds.
(Nov. 6) -- Pitzer College and Pasadena aren't all that far apart as the crow flies along the Foothill Freeway. This week their tax-exempt 15-years bonds were 82 basis points apart for a simple reason. Pitzer College is in the single-A rating category and Pasadena's electric revenue bonds are double-A. The college's 15-year maturity yielded almost 5% tax-exempt while Pasadena's yielded 4.15%. On shorter maturities it was Pasadena 3.25% in nine years, Pitzer College 4.53% in 10 years, and single-A San Francisco Airport bonds at 4.46% in 11 years. We summarize all this in our weekly review. Of course, an electric utility also benefits from providing an "essential" service. Income-oriented investors have to consider those differences in choosing new issues. Investors who want the highest ratings possible give up a lot of yield for the privilege. Otherwise it wasn't an earth-shattering week for yield movement; tax-exempt rates were a bit higher.
(Nov. 5) -- As we anticipated, the Oceanside City Council did the right thing last night and raised its water and sewer rates to support existing debt tied to these services. Now the city will wait to see if the rate increases remove a rating agency's downgrade warning. In other news, Warren Buffett's love affair with bond insurance for municipal debt is looking more like a short fling. Standard & Poor's now says it might downgrade Berkshire Hathaway Assurance Corp. from triple-A, citing concern about the financial impact of Buffett acquiring the rest of Burlington Northern Santa Fe. We have no doubts about the sound backing provided by the BHAC financing backing but Buffett's once-promising municipal market star is fading if the trumpeted "triple-A" insurer ends up double-A. In the market, California wrapped up its latest tax-exempt general obligation bond sale. The taxable equivalent yield on a 25-year bond for some investors rose above 8% or even 9%, depending on your income bracket. In contrast, the state's taxable G.O. deal this week yielded 7.26% on a 30-year bond.
(Nov. 5) -- California's new tax-exempt bond sale suggests the state still can borrow a little cheaper than Puerto Rico, just a month after barely beating a Virgin Islands "rum" tax deal for a lower yield. How far the mighty Golden State has fallen! California also sold its taxable Build America Bonds and the U.S. government handout made that deal attractive. Our November print edition mentioned a new Palomar Pomerado Health debt sale because of intriguing yield possibilities. Moody's Investors Service just downgraded the health provider by one notch. That might kick the yields a little bit higher. Meanwhile, Moody's affirmed its credit ratings on the San Joaquin Hills and Foothill/Eastern toll road projects in Orange County. California's Assembly has joined the Senate and approved a gigantic 2010 bond election for water-related improvements. [Update:The bond election appears set to go in a year because the state Senate approved the overall water package early this morning.] Are you afraid there aren't enough billion-dollar bond sales coming out of California? Don't worry! The State Public Works Board now looks like it will sell $1.3 billion in a couple weeks.
(Nov. 4) -- Late today (Wednesday, Nov. 4), probably into the evening, the Oceanside City Council will get a chance to do the right thing and approve a water and sewer rate increase that provides an appropriate financial cushion for existing debt. Oceanside's financial services director sent a memo to the city council in October and cautioned that Standard & Poor's is "closely watching" the outcome of their rate hike decision. We expect the city council will do the right thing. The background of how a rating warning came about can be viewed here.
(Nov. 3) -- How appropriate. We barely got done noting the municipal frenzy over taxable debt (see item below) and a few hours later yesterday the State of California says it will sell $750 million taxable G.O. bonds. The 30-year taxable Build America Bonds will be sold today, just as the state also is kicking off its $1.5 billion tax-exempt sale. The really strange part? Someone contacted the state and expressed interest in buying a ton of taxable state bonds. The state's reply? Sure, why not! After all, the U.S. "stimulus" package will pick up 35% of the interest expense. As we note in our comment about all this, as long as the state is so eager to grant requests, we are tempted to pick up the phone and ask California to pass a budget that is truly balanced one of these years. Think the state would agree to that, too? As for another big planned sale, the November 10 debt offering that will help local governments offset California's property-tax grab is going to carry credit ratings equal to the state's own G.O. bonds. That is because repayment ranks high on the state's priorities, right behind education and G.O. bonds. If you don't think California already has enough voter-approved but unsold bonds on its plate, guess what? California's Senate last night gave a green light to ask voters to approve $10 billion of water-related bonds in an election a year from now. Now the Assembly is considering the proposal. In another piece of market news, bond insurer FSA will get a new name after it was recently acquired by Assured Guaranty Ltd.
(Nov. 2) -- Taxable Build America Bonds drained even more supply away from the traditional tax-exempt market in October. Overall taxable issuance in the U.S. reached 37% of the municipal bond market. In a long-running saga, a November 10 court hearing is near for the global settlement involving Los Angeles Regional Airport Improvement Corp. lease revenue bonds tied to United Air Lines, Inc. The bond trustee provided more details on the process late last week. Our November print edition discusses a barbell strategy and notes that the "long" end doesn't always have to be as long as 20 years and above. It can be tailored to suit your individual goals and risk tolerance, etc. However, if you are looking for really long maturities, this week's $1.5 billion California general obligation bond sale provides some candidates. By the way, the November print edition will arrive soon because it was mailed at the very end of October.
(Oct. 30) -- Tax-exempt yields rose on longer maturities this week, not so much on bonds due over the next decade. If you don't understand our headline ("State Reputation Down"), it was mainly written to counter some crowing by a state treasurer's spokesman. The state is apparently thrilled it could lower yields a bit at the final pricing of the "deficit" bonds (AKA "economic recovery" bonds). These bonds carried a double-barreled security yet they still had to yield just a bit under 5% tax-exempt on a 13-year maturity. That is just another sign of how far the mighty have fallen. Nothing to crow about there. A health system also was in the market this week and paid 5% to borrow in 12 years. See a short weekly summary here.
(Oct. 29) -- Yields are dropping in the pricing for bigger institutions as California wraps up its $3.5 billion sale of economic recovery ("deficit) bonds to refinance certain existing debt. We expected as much because the double-barreled security is too attractive for some to pass up. A 13-year maturity offered with a preliminary 5% yield a couple days ago probably will yield closer to 4.85%. A shorter maturity (four years) might end up yielding around 2.48% instead of the preliminary 2.55%. Individual investors who placed orders during the two-day "retail" period can always walk away from the lower yields, but most will no doubt hang on because the yield "premium" is still quite attractive relative to other higher-rated municipal bonds.
(Oct. 29) -- Is a taxable 6.26% on a 40-year municipal bond really all that appealing? Not when you consider the tax-exempt alternatives. And never mind that the issuer of that taxable bond can't keep 5,000-pound chunks of a bridge from tumbling to earth. Meanwhile, another rating agency has weighed in on third-quarter trends and noted that the ratio of municipal bond upgrades to downgrades was 0.8-to-1. Not a surprise during a recession; indeed, it might surprise some that there were that many upgrades. In a speech last night and comments this week, two Securities and Exchange Commission members rattled their sabers about increasing the SEC's oversight of the municipal bond market. As one of them said, municipal bond investors get treated as second-class citizens, a point we have made since the 1980s. We fear, however, that the commissioners might be speaking loudly and carrying a little stick. Congress might not be as enthused about reforming the regulatory environment for municipal issuers. The two-day "retail" offering period is now over and California's "deficit" bond refinancing drew about $2.5 billion of orders.
(Oct. 28) -- In a recent print edition we discussed a way local governments could use bond proceeds to offset a state takeaway of property tax dollars for its own budget. That bond sale is expected to be priced on November 10. Meanwhile, the first day of California's deficit bond sale to refinance existing debt drew enough orders for about half of the overall offering. Juicy yields, as we noted below, drew investors' attention. Another municipal bond sale with higher-yielding potential is being prepared for a prominent healthcare provider in northern San Diego County. Fitch Ratings grades the bonds BBB. Yesterday we mentioned a Standard & Poor's downgrade warning for certain Oceanside Series 2008 wastewater certificates of participation. The reason is fleshed out in our update on another page. As we expected, it has to do with a city vote on rate increases.
(Oct. 27) -- California's $3 billion sale of deficit bonds (euphemistically called "economic recovery" bonds) will offer investors some tasty yields, even though the debt is stronger than the state's general obligation bonds. Tax-exempt yields in 10 years could run around 4.6%, or roughly a full percentage point more than recent rates on higher-quality local bond sales. The longest maturity (due in 2022) might yield around 5%, based on current estimates. Bond proceeds will refund certain shorter-maturity 2004 economic recovery bonds to help the state stretch out the debt repayment schedule. The deficit bonds are secured by both sales tax revenue and a back-up general obligation pledge and carry a higher rating than California's own general obligation bonds.
(Oct. 27) -- While we haven't seen the actual reason yet [UPDATE: here is the reason], Standard & Poor's has put Oceanside certificates of participation (Series 2008 sewer system) on a watchlist for possible downgrade. The COPs are rated A+. The Oceanside City Council is facing a test over whether it will raise water and sewer rates to help preserve financial cushions for the bonds (or otherwise fire several water and sewer employees to help accomplish the same thing). We believe the city council will revisit this issue on November 4.
(Oct. 27) -- We warned readers before about growing hostility to tax-exempt bonds and now the source of our concern has been formalized in a Congressional 50-page attack, or should we say "study," that discusses the current "regime" of tax-exempt financing. Wow. Even so, some issuers can't get enough of those taxable Build America Bonds, which is just going to help make a Congressional case for "regime change." Meanwhile, one rating agency expresses a little concern about the big capital improvement plan brewing at Los Angeles International Airport, even though this remains a solid credit with senior revenue bonds in the double-A rating category.
(Oct. 23) -- Tax-exempt yields ended little changed this week after a recent run-up. The run-up helped erase the nightmare of a certain borrower being able to pay only 2.50% tax-exempt on a 10-year bond in late September. A solid double-A borrower this week paid 3.40% on a 10-year maturity, still nothing to write home about for an investor. Meanwhile, if local borrowers aren't mocking the state, they should at least enjoy a private chuckle. The state's Public Works Board paid 5.79% to borrow in 20 years this week. A higher-rated local district paid 4.85% on a 30-year maturity. See our weekly summary for our discussion of all this. Maybe they should dock all the state legislature's pay and apply that toward the higher borrowing cost since this is the penalty for years of approving deficit-ridden budgets. Ha ha ha, as usual the joke is still on taxpayers. Speaking of jokes on taxpayers, we note that there is a downside to the state's plans to sell $3 billion of economic recovery ("deficit") bonds next week to refinance certain existing "deficit" bonds. In other news, an underwriting syndicate member passed along a public agenda item earlier this week about a big $1.6 billion airport bond sale. By the way, Fitch Ratings sees an upside to an assistance program for housing agencies we discussed the other day.
(Oct. 22) -- If you are tired of hearing about the State of California or its various agencies tapping the new-issue market just about every week (or so it seems), stop reading now. The state plans to sell even more general obligation bonds during the first week of November; we're not aware that the size has been decided yet. In mid-November California's State Public Works Board, which also was in the market this week, plans to sell $769 million of bonds. (The 20-year PWB bonds that priced the other day yielded a bit shy of 5.7%. A local water district's revenue bonds were priced the other day to yield 4.45% on a 19-year maturity.) California's Department of Water Resources also plans to sell water system bonds in mid-November. In other short updates, we talk about "Ma" running for the hills over more "total return" lunacy. We discuss the Vallejo City Unified School District for a very old reason. And, state and local housing agencies hope federal assistance can get them back to selling more tax-exempt bonds.
(Oct. 21) -- We have moved yesterday's item about Moody's planned three-notch upgrade for the California economic recovery bonds to another page. We include another update to note that Fitch Ratings also plans a three-notch upgrade for this debt. All this is happening in conjunction with the state's $3 billion sale next week of such "deficit" bonds. The upgrades will be welcome because downgrades (or "downs" as we call them in the headline above) tend to dominate when the economy slumps. Go here to read about third-quarter trends in downgrades and upgrades. You already should know what the Bond Advisor thinks about the trend toward taxable Build America Bonds. Isn't it thrilling to know that yet another issuer might be close to jettisoning almost all tax-exempt bonds from a big sale? The good news is that it wasn't as bad as a dealer told us.
(Oct. 20) -- The California State University system is certainly affected by state funding cuts. The good news, Moody's said, is that $3.6 billion of CSU debt won't be downgraded thanks to efforts to raise revenue and watch expenses. Bad for students, good for bondholders. A variety of deals were priced the other day in California's municipal bond market. Here are some quick tax-exempt yield examples. Fitch Ratings also is finished with assigning ratings based only on a financial guarantee. You can guess why but go here for the official reason. Investors have had to do some extra credit-related legwork when they made the mistake of buying a municipal bond based only on the financial guarantee rating. The "underlying" rating, as we have explained, is also crucial to know, but some insured bonds never received an "underlying" rating in the past.
(Oct. 19) -- The pace of money pouring into municipal bond funds finally slowed in the latest weekly reporting period. We don't need all that demand with the drop-off in tax-exempt bond supply. This week the California State Public Works Board will do its part toward leaving only crumbs for the tax-exempt bond market. Most of its deal will be sold as taxable Build America Bonds. The Southwestern Community College District also is selling most of a G.O. deal on a taxable basis this week. Meanwhile, while some school districts are managing to get upgrades at a difficult time, not all of them are so fortunate.
(Oct. 16) -- Tax-exempt yields rose again this week, ending a quarter-point higher in some instances. Considering they were rising from levels seen in the 1960s, plenty of investors remain unenthused. See our summary here. Recent yield levels weren't the only thing to bring back memories of the 1960s. State tax collections across the U.S. dropped a record 16.6% in the second quarter of 2009 over the same period a year earlier, the Nelson A. Rockefeller Institute of Government reported. It was the largest drop in state tax receipts since John F. Kennedy was President, the Rockefeller Institute added. Local governments are faring better because they rely heavily on property tax collections, which tend to be more stable. Local tax receipts declined by only 2.8% in the second quarter (as expected, local sales taxes were down but property tax collections actually rose). In other news, another big issuer plans to sell $1.3 billion of taxable Build America Bonds. The bonds are backed by toll bridge revenue, a security that would entice tax-exempt buyers. But sorry, they are being sold taxable so the issuer can lap up the Washington D.C. interest-rate subsidy. Also, you do not see this everyday. The rating on a municipal bond is upgraded to Aaa from Ba3. Then again, the reason is different, too.
(Oct. 15) -- The tears are flowing for some issuers who are amazed they aren't entitled to borrow at tax-exempt yields seen when LBJ was President. So they are taking their marbles and going home, at least for now, with some new bond sales being postponed or reduced in size because yields rose from recent ridiculous lows. Wah wah wah, too bad. In a new bond sale pending as soon as this month, we suggest investors consider an issuer that went through a tough stretch a decade ago but is now back in the single-A category. As we also explain in that little item, nonprofit health care issuers of tax-exempt bonds are definitely not created equal.
(Oct. 14) -- We noticed when Standard & Poor's downgraded the "underlying" rating for the Sierra Kings Health Care District that bond insurance backs some of the debt. The insurance still could come in handy if the bankruptcy process caused a payment glitch. Speaking of bankrupt health care districts, we noted yesterday that S&P removed one of them from a "WatchList." We also find something encouraging about a recent poll and the state budget process.
(Oct. 13) -- Fitch Ratings, after adjusting its loss expectations for certain mortgage-related products, decided to downgrade bond insurers Assured Guaranty Corp. to AA- from AA and Financial Security Assurance to AA from AA+. Fitch took both companies off a "watch" list for further downgrade. Standard & Poor's has downgraded Series 1993 revenue bonds backed by Downey Community Hospital to C from CCC and suspended the rating because of tardy financial statements. Fitch Ratings has lowered its rating on Puerto Rico Electric Power Authority revenue bonds to BBB+ from A-. And, just to throw in a downgrade from Moody's as well, that rating agency cut the grade by one notch on a small amount of Petaluma debt. The municipal bond market was closed on Monday for Columbus Day.
(Oct. 12) -- The bankrupt Valley Health System will be holding a December election with an obvious angle to follow for outstanding tax-exempt bonds. We have discussed this previously but the election date is official. In other recent developments, municipal bond fund "inflows" are up again as the 2009 comeback continues. Meanwhile, the State of California's tax revenue is down again, or at least coming in less than expected.
(Oct. 9) -- The State of California might refund as much as $4 billion of "certain" outstanding economic recovery bonds later in October. The Economic Recovery Financing Committee, which oversees such approval, plans to meet on Monday (October 12) to consider authorizing the bond refunding. The Bond Advisor always has preferred referring to the "economic recovery" debt as "deficit bonds;" it was authorized by Proposition 57 in 2004 after Gov. Schwarzenegger took office.
(Oct. 9) -- The Sierra Kings Health Care District has filed for Chapter 9 bankruptcy protection. In response, Moody's Investors Service downgraded the district's existing general obligation bonds to Ba2 from Baa3 and cautioned that more downgrades are possible. As always, bondholders need to be careful about knee-jerk reactions because panic selling won't take into account how the bonds ultimately fare (even if there is a payment glitch or two along the way).
(Oct. 9) -- Tax-exempt yields in California's municipal bond market finally rose this week, reflecting broader resistance to rates right out of the 1960s. California's big sale, most of which went taxable, also was a test of the market's appetite and institutions pushed for higher yields on the $1.3 billion tax-exempt portion. See our weekly update here. In another sign of how far the mighty have fallen, consider California's BBB G.O. rating from Fitch next to the new upgraded AA-minus rating for the State of Louisiana. As we have noted previously, Louisiana used to be the muni bond market's laughingstock, but you-know-who now wears that crown. As far as big upcoming sales, California's Public Works Board plans an $820 million lease revenue bond sale but almost three-fourths might be sold as taxable Build America Bonds. Catholic Healthcare West also might be in the market with single-A hospital revenue debt (tax-exempt). Meanwhile, a smaller community college district demonstrates that fiscal discipline pays off.
(Oct. 8) -- Riverside County's bond rating now has a "negative" instead of a "stable" outlook as the economy takes a toll on its budget reserves, according to Moody's. Meanwhile, "retail" investors offered to buy 33% of California's tax-exempt general obligation bonds and now bigger institutions take a crack at the deal. Yields might have to be sweetened even more. (UPDATE: Indeed, we hear as of midday Thursday that yields have gone up to attract institutional buyers, including talk about the 20-year bond yielding closer to 5% instead of 4.66% in the "retail" order period. However, we haven't seen the final pricing yet.) Finally, why not torture tax-exempt investors with yet another example of an issuer turning to taxable Build America Bonds?
(Oct. 7) -- The preliminary yields for the "retail" order period on California tax-exempt general obligation bonds aren't as compelling as earlier this summer, no surprise there. Then again, they don't yield a heck of a lot less than a triple-B Virgin Islands "rum" deal. However, we should note as of Wednesday that the state is sweetening the yields a bit on the tax-exempt portion. A bond due in 20 years is offering a preliminary yield of 4.66%, up from 4.63% earlier.
(Oct. 7) -- Years ago when United Airlines used its bankruptcy to try to weasel its way out of certain tax-exempt bonds sold by Los Angeles Regional Airports Improvement Corp., the Bond Advisor called it a travesty. Although United convinced some courts to go along with its legal arguments, a U.S. appellate court set things right for bondholders in May and, the other day, a "global" settlement was finally announced to pay bondholders $75 million for their claims. In other news, when a county faces a possible downgrade on $1 billion of bonds, would you assume the recession is to blame? It isn't quite that straightforward as this little item explains. In need of some yield humor after seeing rates plummet? How about getting excited as tax-exempt yields finally rise by one basis point? We're rich! Ha! Here is an item just to keep bringing up depressing news. The Southwestern Community College District in southern San Diego County plans to sell $100 million general obligation bonds. Only $35 million will be tax-exempt; $65 million are planned to be taxable Build America Bonds.
(Oct. 6) -- A tax-exempt bond issue we mentioned briefly in our October print edition did in fact get priced. It involved the Virgin Islands, rum, and decent yields, but not everyone would want to take a sip. Earlier this summer you would have seen tastier yields on California general obligation bonds, but not anymore. This week's California bond sale will see plenty of demand chasing too little supply. Pitzer College plans to sell bonds this month, offering investors a chance to diversify beyond state and local government debt.
(Oct. 2) -- This is getting old, isn't it? If you think yields can't keep dropping on high-quality new issues, then don't read our weekly update here. If you were ticked off when 10-year tax-exempt yields dropped well below 3%, how about seeing a deal with a 10-year maturity yielding 2.5%. Yikes! We'd be extremely cautious about buying at some of these yield levels just to get a higher-rated muni. There is too much downside risk. Then again, it isn't a lot of fun trying to find alternatives as credit spreads tighten. California's big G.O. sale will get attention next week but much of it will go taxable. Most of today's other brief updates are teasers from our October print edition, such as a single-C bond with possible upside; an old controversy about certain school bonds that still manages to stir up inflammatory stories, and bonds backed by the downgraded insurers that trade above par (the market rally is at least lifting a lot of ships). Finally, a draw on a reserve fund to cover a bond payment can help raise a red flag but, in and of itself, does it tell you all that much? These three examples suggest a draw is just one piece of information.
(Oct. 1) -- California's $4.5 billion general obligation bond sale planned next week could be eaten alive by taxable debt. Between taxable Build America Bonds and other reasons the state is selling part of the debt taxable, the tax-exempt market might see $1.3 billion at best. Of course, those are just preliminary numbers, but we're just saying.
(Oct. 1) -- Today the Los Angeles Unified School District plans to sell $1.4 billion of taxable Build America general obligation bonds. So this is a good time to note that taxable BAB's stole roughly 28% of the September volume from the traditional tax-exempt bond market (roughly $7 billion), according to Thomson Reuters. This is why tax-exempt yields are so low because a record amount of cash keeps flowing into tax-exempt funds. There is a ton of demand and declining supply. Even so, the taxable yields can't compete with the after-tax return on a tax-exempt, even at the current paltry levels. And just how low are some of these tax-exempt yields? Look at what the East Bay Regional Park District paid to sell general obligation bonds this week (2.50% tax-exempt in 10 years!). Meanwhile, the Pasadena Area Community College District sold $52 million of bonds, but almost half went taxable.
(Oct. 1) -- Bonds issued by the Merced County Regional Waste Management Authority are being reviewed by Moody's for a potential downgrade. Also, with tax-exempt yields at "artificially" low levels right now, what can an investor do? A "barbell strategy" with a twist is one idea, especially because the twist involves a 2011 maturity yielding 3.05%. In our October print edition we also mention a new proposal that we suggested way back in the 1980s. It involves changes in the governing body of the municipal bond market's self-regulatory agency.
(Sept. 30) -- John Muir Health, a prominent health care provider in the East Bay near San Francisco, plans to sell $102 million of revenue bonds soon. Meanwhile, we are assuming a tax-reform plan put forth by yet another California blue-ribbon commission is going to be dead on arrival. Also, another prominent issuer in the municipal bond market (but outside California) turns to taxable Build America Bonds. It never ends.
(Sept. 29) -- The Bond Advisor's California Municipal Bond Fund Index is now up 25% since December. You can see why we told sophisticated investors to buy municipal bonds last fall. Fitch gave San Francisco Airport Commission second series revenue bonds an upgrade to A+ thanks to good performance during a tough economic time. Also, while you may have heard about a downgrade for an MBIA insurer, it does not affect the single-A rating for the company's new and separate public finance unit (National Public Finance Guarantee Corp.) that backs all the old insured bonds.
(Sept. 25) -- What happened this week? Same old, same old. Tax-exempt yields keep dropping, issuers keep selling those taxable Build America Bonds. Go here for our weekly summary. If you really want to see low tax-exempt yields, watch the upcoming sale from a regional park district issuer with a triple-A rating from S&P and an Aa1 from Moody's. Separately, the Los Angeles Unified School District plans to price more than $1 billion of taxable bonds in coming days. Are these taxable BABs? Yes they are. The district also is selling more than $180 million tax-exempt G.O. bonds. We also understand a Pasadena Area Community College District bond sale we highlighted previously for its high ratings might be sold as taxable BABs. Remember, federal taxpayers, you are paying for these taxable BABs to the tune of a 35% interest-cost subsidy. It is an unneeded federal "stimulus."
(Sept. 24) -- The San Francisco Airport Commission plans to sell as much as $625 million of bonds in an effort to refund certain existing debt subject to the federal Alternative Minimum Tax. This strategy is permitted by this year's federal "stimulus" legislation, though it only applies to certain existing AMT municipal bonds. A local school district was in the market with a deal mainly structured as capital appreciation bonds. And, "retail" investors ended up buying three-fourths of the state's massive RAN sale.
(Sept. 23) -- After California passed the $6.5 billion mark in "retail" orders for its revenue anticipation notes on Tuesday's second day or order taking, the word went out that the state probably will pay at the lower end of a yield range for the $8.8 billion borrowing. Institutional orders are being taken on Wednesday (Sept. 23). That means notes due next May would yield around 1.25% and the notes maturing in June, about 1.5%. That isn't a surprise because it is a seller's market, even for borrowers with reputations for chronic budget deficits. California isn't about to default on a note issue. The state also is paying a yield premium relative to what investors can get on higher-rated tax-exempt issues.
(Sept. 22) -- California drew almost $5.4 billion of revenue anticipation note orders from "retail" investors on the first day of a two-day order period for smaller investors, equaling more than three-fifths of the total sale. The notes due next May may yield from 1.25% to 1.5% and the notes maturing in June, 1.5% to 1.75%, though that could change once the final order period for bigger investors ends on Wednesday. (Most of the orders submitted have been for the June maturity.) Retail buyers can cancel orders if the final pricing isn't to their liking. We note elsewhere that a California city recently paid 0.47% on notes due in a year and Massachusetts notes due next June yielded 0.31%. So California is paying roughly a full percentage point more for its massive $8.8 billion note sale. As we explained in recent print editions, if you really need to park money for a few months the state's yields give you a little more return over the other dismal alternatives in the short-term market. A few weeks ago most market participants had hoped the California deal would return even more, but yields have kept collapsing on the short end of the yield curve.
(Sept. 21) -- Several of the Upcoming Sales on our list should be priced this week as issuers try to take advantage of a seller's market. Yields on higher-rated deals are getting downright depressing. As we note here, on one issue last week an investor had to go out 19 years to find yield above 4%. Part of the reason yields keep dropping is because municipal bond funds are still raking in cash. Meanwhile, California's big revenue anticipation note sale takes center stage in the short-term market.
(Sept. 18) -- Not enough supply, at least of tax-exempt bonds, and plenty of demand continues to push yields lower in the municipal bond market. (There is too much supply, in our opinion, of those taxable Build America Bonds.) Go here for our weekly review and see which bond index has dropped so low, it is at a 1967 level.
(Sept. 17) -- Cedars-Sinai Medical Center, a prominent health-care provider in Los Angeles, plans to sell $535 million of municipal bonds in coming weeks. Given the paucity of supply and lack of bigger offerings, the deal will get a look from many investors. California also is looking at a sale of $5 billion of general obligation bonds in October, including some more taxable Build America Bonds. These issuers and others will be thrilled to know that tax-exempt yields, at least as measured by certain "generic" scales, are near record lows at certain parts of the yield curve. Of course, lower-rated issuers are still paying a penalty, but not as much as they were earlier this summer because investors are willing to take more credit risk to get added yield.
(Sept. 16) -- We happened to look at a recent Standard & Poor's rating discussion on certain municipal tobacco settlement bonds and noticed that one $59 million local California issue dropped to B+ from BBB. You can read about it here. Most other deals remained triple-B, but with a longer-term "negative" outlook. In other "general news," there are signs California's economy is rebounding, even if slowly. Fitch Ratings also didn't give the state's revenue anticipation notes its highest rating. However, this doesn't necessarily come as a surprise, as we mention here.
(Sept. 15) -- The Bond Advisor's California Municipal Bond Fund Index has now risen 22.4% since last December, thanks to another increase last week. We told readers last fall that municipal bonds were a screaming buy. In other news, California's revenue anticipation notes received ratings and are ready to sell next week. Also, the economic downturn has not only put a dent in passenger traffic at San Jose's airport; it also put a dent in the credit rating from Fitch, which downgraded the airport's revenue bonds by two notches to A-.
(Sept. 10) -- Let's go outside California's borders a moment and ponder what this tidbit means for the municipal market. Utah is selling more than $1 billion of general obligation bonds and about 70% will go as taxable Build America Bonds. Mark our words, and we've made this point in several recent print editions, the rush to sell taxable BABs just to seize on a federal "stimulus" giveaway could mean bad things for the traditional tax-exempt market down the road (apart from what the trend is doing to tax-exempt yields in the near term). Elsewhere in the market, the Bond Advisor has stressed during the credit crisis that smaller investors shouldn't get caught up in the "sky-is-falling" view of the muni market. A report noting that school district downgrades will probably be the exception, not the rule, only confirms what we have all along about "traditional" issuers, even during a steep economic downturn.
(Sept. 9) -- Upcoming bond sales from two issuers in the Pasadena area are worth a look from a variety of investors. Also, the Ridgecrest Redevelopment Agency gets rewarded with an upgrade after coming back from a tough stretch in the late 1990s.
(Sept. 8) -- Our September print edition discusses the rebound in the Net Asset Value of our California Municipal Bond Fund Index, which is at the highest point in about a year. The Index has climbed even higher in the last week, reaching $11.82. In addition, municipal bond funds continue to take in cash at record levels. Most of our readers buy municipal bonds directly and the slope of the yield curve should continue to be the biggest factor in your investment decisions, along with a willingness to take on some small credit-related risk.
(Sept. 4) -- Even though those irritating taxable "Build America Bonds" are taking volume from the tax-exempt market, this week saw a decent mix of traditional municipal sales in California. Most deals were relatively small, except for a San Francisco utilities offering. Longer-term rates dropped more than one-tenth of a percentage point. For more on recent market trends go here.
(Sept. 3) -- We are starting to rebuild our list of upcoming sales. A $200 million planned sale in a handful of weeks by the California Municipal Finance Authority on behalf of Community Hospitals of Central California is worth flagging. Moody's rates the bonds Baa2 so you know the yields will be alluring. Watch our September print edition for more discussion on this sale. Also, the Mojave Water Agency plans soon to sell $51 million of water revenue certificates of participation. Revenue bonds tend to be popular during an economic downturn, even if COPs are involved. Fitch rates these bonds AA-minus.
(Sept. 3) -- We added a few recent bond pricings from this week to our chart showing examples of recent sales. Those of you who once considered a 4% benchmark the yield you desired (and needed) on a 10-year bond will be sorely disappointed by some of the recent sales.
(Sept. 1) -- California plans to sell its $10.5 billion of revenue anticipation notes from September 21 to 23. The "retail" period for individual investors will occur during the first two days, with bigger institutional investors stepping in on the 23rd. The "second part" of our August edition discussed the RAN sale at more length. Most income-oriented investors are better off on the longer-end of the yield curve, but the state's sale could be alluring if you need to park some cash over the next nine months or so.
(Sept. 1) -- We go off on another rant about these taxable "Build America Bonds" in the second part of our August print edition that subscribers will see soon. Here is another tidbit to justify our rant. In August about $33 billion of municipal bonds were sold across the U.S. Of that total, almost 31% were sold as "taxable" bonds, according to data compiled by Thomson Reuters. Isn't that depressing?
(Aug. 28) -- The second part of our two-part August edition was mailed on August 31, a bit later than we planned, and the September print edition will mail on September 5.
(Aug. 21) -- Moody's Investors Service is finished downgrading the State of California after taking the state all the way down to Baa1 earlier this summer (Baa3 is the lowest investment grade). Moody's took the state off a "watch" for possible downgrade and said the rating outlook is now "stable." However, Moody's said the state's amended budget last month relied on several one-time fixes that won't solve longer-term solutions. California will still have to deal with future deficits, partly because some of the "one-time" fixes have to be paid back over time. Income-oriented investors should consider the state's ratings almost irrelevant by now. The key factor to consider is the yield premium over other municipal issuers, and we mentioned that topic in August's print edition.
(Aug. 21) -- Be happy with your crumbs, supporters of the tax-exempt bond market. At least that seems to be the message in the "new" and distorted municipal bond market. The University of California sold more than $1 billion of taxable Build America Bonds this week and offered $300 million tax-exempt bonds. Elsewhere in the broader U.S. market the Texas Transportation Commission sold more than $1 billion of taxable BABs. Simple supply and demand dictates that these taxable sales will have an impact on the tax-exempt market, and it's not coincidence that tax-exempt yields were once again lower again this week. Taxable muni sales aren't the only reason but they are certainly a factor. Even so, lower-rated munis with a track record of safety still offer decent yield premiums for those of you who don't want to settle for a higher-rated tax-exempt offering about 4% in 15 years. For more on recent market trends read more here.
(Aug. 21) -- As you can see, we have replaced our "old" site with a new format and will soon add extra features. It is still in a "bare-bones" format but more changes are looming. For now we will feature some of the staples from our "old" site, such as periodic discussions of rate trends, highlights of upcoming sales, and various updates pertinent to California's municipal bond market.
(Aug. 18) -- Standard & Poor's removed California's credit rating from a list for potential downgrade because the revised fiscal 2010 budget "significantly reduces state expenses and provides a path to improved financial liquidity," S&P said in a report. The outlook from S&P is still "negative," which means the state's rating still could drop within the next year depending on how budget trends unfold.
(Aug. 14) -- The good news for investors looking for new municipal bonds? The Regents of the University of California are ready to sell about $1.4 billion of new general revenue bonds. (The deal has been priced and we have comments on this page.) These bonds are popular with safety-oriented investors because they are rated Aa1, only one notch below triple-A, by Moody's. The bad news? If you love buying tax-exempt bonds, a big part of the sale isn't designed for you. The University of California is joining the growing parade of issuers that is voting for taxable "Build America Bonds" instead of tax-exempts. In fact, slightly more than $1 billion of the deal is going the taxable route. Issuers continue to jump on this taxable bandwagon, which was authorized under this year's federal stimulus act, because the U.S. is subsidizing 35% of their taxable interest cost. In the end the issuers have concluded this federal giveaway lets them borrow even cheaper than the privilege of selling tax-exempt bonds. (Many of the taxable bonds also can target new investors bases, such as pension funds, that wouldn't buy tax-exempt debt.) The first part of our two-part August print edition mentions that these taxable Build America Bonds are helping to distort the tax-exempt market by shrinking supply. As long as demand for tax-exempts remain steady this means yields on some tax-exempt maturities will be lower than they would be without this taxable bond program. As we also discussed months ago, the Bond Advisor is concerned about the long-term implications for the tax-exempt market if the Feds decide to keep finding new ways to encourage issuance of taxable municipal bonds. A lot of blood was spilt in the past to protect the sanctity of tax-exempt bonds. We would hate to see those gains squandered. By the way, $325 million of the University of California bond sale is still being sold as traditional tax-exempt debt.
(Aug. 14) -- The euphoria over passage of California's budget led to lower yields on the state's general obligation bonds in the secondary market, with the rally most pronounced on shorter maturities. That rally petered out in recent days. The state will start selling revenue anticipation notes now that a budget is in place and that will probably provide some added reassurance over the state's cash-flow crunch. As our August part one edition explains, the "panic" over the state's bonds failed to take account the steps the state's Controller took in recent weeks to protect debt service payments. For more on recent market trends read more here.