February Sees Anemic Volume of $16.16B
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Vol. 375 No. 33474 N.Y., N.Y. THE DAILY NEWSPAPER OF PUBLIC FINANCE Tuesday, March 1, 2011 TUESDAY Vallejo Shows the Way www.bondbuyer.com February Sees Anemic REGIONS ‘Poster Child’ Not PUERTO RICO WANTS TO TRANSFORM So Bad After All Volume of $16.16B more than 70 acres of rundown waterfront and industrial space in San Juan BY PATRICK MCGEE Lightest for the Month Since 2000 into a mixed-use community anchored by a major Second of a three-part series BY DAN SEYMOUR time of year in a decade. destination hotel to generate Vallejo has been mired in a Most people expected volume tourism in the area. 4 messy, prolonged and expensive The municipal bond market to drop this year because of the bankruptcy proceeding since May remained comatose in February, blitz of issuance in December, AN IOWA WATER DISTRICT’S LONG- 2008. But if the California city is with state and local governments which likely pulled forward into AWAITED PLAN to restructure “the poster boy of a new era,” as reluctant to try and raise money 2010 some deals that would have $140 million of debt some have suggested, that doesn’t in the face of unreliable demand otherwise come this year. — including $83 million of look too bad for bondholders. and volatile borrowing costs. The median forecast for water revenue bonds — is now Vallejo bonds backed by non- Municipalities floated just 2011 issuance coming into the on hold due to litigation filed by Bank of America Corp. in general fund revenues amount to $16.16 billion of debt in Feb- year was $395 billion, after a an attempt to block a pending $62 million of debt. They have ruary, according to Thomson record $433 billion slate last asset sale. 6 been paid in full and on time The need for market access Reuters, a 40.6% plunge from year, according to a Securities throughout the bankruptcy pro- explains why there have been so the same month last year and the Industry and Financial Markets WASHINGTON ceeding. They include securities few Chapter 9s, says lightest February issuance since Association survey of analysts with dedicated income streams in- James Spiotto. 2000. who expected the Build America DEALER AND BANK GROUPS WARNED they face a regulatory quag- cluding water revenue bonds, tax After a historically meager Bond program to expire, as it did mire with the Municipal allocation bonds, and assessment of participation, has serviced the slate in January, municipalities on Dec. 31. Securities Rulemaking Board’s and improvement district bonds. debt at less than contractual rates have sold $28.91 billion of bonds But with investors withdraw- draft muni adviser pay-to-play The city’s general fund, re- since July 1, 2008. Payments so far in 2011, a 52% drop from ing more than $39 billion from restrictions. 5 sponsible for paying $52 mil- were even suspended between the first two months of 2010 and municipal bond mutual funds lion of outstanding certificates Turn to Bankruptcy page 7 the paltriest issuance for this in the past 15 weeks and 30- SOUTHWEST year triple-A rated muni bonds A NEW SECTION OF THE $6 BILLION exhibiting 30-day yield vola- TOLL ROAD that loops around MONDAy’s yields tility as high as 20% this year, the outer Houston metro area Bachus Faults SEC’s Muni issuance has fallen even more 7.0 To Par Call To Maturity 7.0 known as the Grand Parkway 5.88 Unchanged 5.59 Unchanged than expected. could break ground this fall 6.6 6.6 Adviser Registration Rules Issuers are choosing not to test after winning approval from 6.2 6.2 a turbulent market. the Texas Transportation BY LYNN HUME efforts to police this segment of “Now, with the elimination of Commission. 8 5.8 5.8 the municipal market, particularly BABs, at least for the time be- 5.4 5.4 WASHINGTON — House as I have closely followed the ef- ing issuers are faced with issuing ONLINE 2/14 2/71 2/23 2/28 Financial Services Committee fects on Jefferson County, Ala., what would be higher-costing OTHER STATES ARE EYING $2.4 chairman Spencer Bachus, R- in my congressional district,” Ba- debt in the form of tax-exempt is- billion of federal high-speed 6.8 The Bond Buyer 40 6.8 Ala., is warning the Securities chus said in a one-page letter sent suance,” said Howard Mackey, rail money that was allocated 6.2 6.2 and Exchange Commission that to SEC chairman Mary Schapiro Turn to Volume page 18 for Florida, but is now up for 5.6 5.6 he does not support its proposed last week. “Jefferson County’s grabs after Gov. Rick Scott rules for a municipal adviser reg- financial woes can partially be effectively ended the state’s 5.0 5.0 istration system because they are attributed to unscrupulous mu- rail project by rejecting the Slim Sales 4.4 4.4 too broad and do not reflect con- nicipal advisers who pocketed Jan.-Feb bond issuance funding earlier this month. FJDNOSAJJMAM www.bondbuyer.com gressional intent. the lucrative fees associated with The SEC proposed the rules the county’s sewer bond offerings ’01 New Money The municipal market was Refunding/ LISTINGS on Dec. 22 after the Dodd-Frank while ignoring the welfare of the Combined unchanged to slightly firmer ’02 New-Issue Calendar 10,15-17 Wall Street Reform and Con- taxpayers. Unfortunately, even Monday amid light to moder- sumer Protection Act directed though I agree with the goal, I Requests for Proposals 11 it to establish a registration and cannot support the proposed rules ’03 Notices of Sale 14 ate secondary trading activity. examination program for muni 15Ba1-1 through 15Ba1-7, which ’04 Job Opportunities 11 Complete market coverage by financial advisers. are overly broad and would reach “I am supportive of the SEC’s Turn to SEC page 5 Bond Redemptions 11-13 Michael Scarchilli appears on ’05 Market Statistics 20-23 773-796 Page 2. INSIDE ’06 ’07 New York State Assemblyman ’08 James Brennan is taking over as ’09 chairman of the Committee on Corporations, Authorities and ’10 Commissions. Page 3 ’11* $0B 10 20 30 40 50 60 70 *As of Feb. 25 Source: Thomson Reuters 01BB030101 1 2/28/2011 6:01:11 PM Market News Tuesday, March 1, 2011 2 The Bond Buyer Munis Move Little as Traders Sit on Sideline he municipal market was is upon us and so is another Meanwhile, 30-year tax-exempt tri- ed triple-A by all three major rating Tunchanged to slightly firm- month of light primary issu- ple-A general obligation bonds were agencies. er Monday amid light to moder- ance,” Randy Smolik wrote at 109.8% of the comparable London In a weekly report, George Fried- ate secondary trading activity. in the daily MMD commen- Interbank Offered Rate. lander, a municipal strategist at Citi, “We’re mostly flat, but it tary. “Despite lackluster trad- Treasuries were somewhat mixed wrote: “The municipal bond market does feel a touch firmer,” a ing, a reach for high-grades in Monday. The benchmark 10-year note continued the powerful rally back from trader in New York said. “We’re the belly of the curve still was was quoted at 3.42% after opening at the peak in yields in mid-January.” maybe picking up a basis point evident.” 3.41%. The 30-year bond was quoted “The positive feedback loop that BY MICHAEL or so in the belly of the curve, “Today’s secondary did not at 4.49% after opening at 4.50%. The pushed yields ever higher for rough- SCARCHILLI if anything.” provide much of an array of two-year note was quoted at 0.70% af- ly 10 weeks through Jan. 14 has been “There wasn’t a ton of trading, but paper to buy,” Smolik continued. “It is ter opening at 0.72%. broken, leaving those who feared the business was getting done,” a trader in logical that many buyers were sidelined An already-skimpy municipal mar- worst standing on the sidelines in many Los Angeles said. “Still, most people because of the lack of offerings, waiting ket is expected to see volume levels cases,” he wrote. “In the longer-term seemed to be on the sidelines for now. to be more active once supply is priced, plummet even further this week when maturity range we favored at the market The tone was a little bit firmer, but like the $300 million Louisiana GO a paltry $1.79 billion of new issuance bottom, yields on triple-A paper are we’re pretty much unchanged.” competitive loan selling Tuesday. But trickles into the primary, according to down sharply: nearly 50 basis points in The Municipal Market Data triple- despite the thin secondary, some buyers Ipreo LLC and The Bond Buyer. 20 years, 43 basis points in 15 years. A 10-year scale fell two basis points did capitulate.” Last week, under much the same We are thus suggesting a bit more cau- Monday to 2.97%, the 20-year was un- Monday’s triple-A muni scale in circumstances, a revised $5.95 billion tion now, but would still put cash to changed at 4.26%, and the scale for 30- 10 years was at 86.8% of comparable came to market, according to Thomson work selectively.” year bonds remained at 4.69%. Treasuries and 30-year munis were at Reuters, $2 billion less than the typical In economic data released Monday, “Another month of re-investment 104.5% according to MMD.