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Muni Bond Market Has Huge Rally Vol. 392 No. 35281 N.Y., N.Y. THE DAILY NEWSPAPER OF PUBLIC FINANCE Thursday, March 26, 2020 THURSDAY Raimondo Muni Bond www.bondbuyer.com Maneuvers THE REGIONS Market Has NEW YORK’S METROPOLITAN Transportation Authority, in For Cash the midst of what Chairman Patrick Foye called the “big- BY PAUL BURTON Huge Rally gest liquidity crisis ever” for the nation’s largest mass As states scramble to fill wid- transit system, received a ening revenue gaps during the BY LYNNE FUNK downgrade from S&P Global COVID-19 pandemic, Rhode Is- Ratings. 5 land is dusting off a 47-year-old The municipal market experi- playbook. enced an enormous rally Wednes- ILLINOIS GOV. J.B. PRITZKER’S On Thursday, the Disaster day, swiftly reversing from the pro- administration named 36 firms Emergency Funding Board, an nounced sell off it had experienced to newly minted broker-deal- er pools it will draw from for obscure body the legislature au- over the course of several wrench- negotiated bond sales. 4 thorized in 1973, is scheduled to ing, dislocated trading sessions due meet at the state capitol in Provi- to the effects of the coronavirus. Bloomberg News WASHINGTON dence to consider Gov. Gina Rai- Municipal benchmark yields mondo’s request to borrow up to Clearly our revenues have fallen off a cliff,” said Rhode Island Gov. were lowered by 60 to 80 basis THE MUNICIPAL SECURITIES $300 million “from the United Gina Raimondo,” who convened an emergency board. points across the curve. Some Rulemaking Board will be pub- States government or any other trades pointed to nearly a 1% bump lishing daily data summaries, private source.” Democrats. and quasi-public agencies with on short-term paper. pushing back comment dead- lines, and suspending a price The board will consist of Sen- In a letter to the four, Raimon- available cash balances. The short municipal market, in- alert in response to market vol- ate President Dominick Ruggerio; do said if the state cannot borrow While closed to public atten- cluding the VRDN market, largely atility and concerns about the House Speaker Nicholas Matti- in a timely fashion, an alterna- dance because of the virus, it will has stabilized. impact of COVID-19. 4 ello; Senate Finance Committee tive would be to transfer money be available through a Capitol TV Put bonds were trading 100 ba- Chairman William Conley; and into the state’s general fund from live stream. sis points tighter than Tuesday and FIRST MANHATTAN CO. HAS AGREED House Finance Committee Chair- general obligation cash proceeds, As of March 20, 12 states have front-end yields have declined from to pay $100,000 to settle man Marvin Abney. All four are state university and college funds Turn to Rhode Island page 4 a “3 handle to 1 handle in the just charges it violated multiple the past few sessions, reversing the municipal securities rules meteoric rise in yields last week,” after the Financial Industry WEDNESDAY’S YIELDS according to ICE Data Services. Regulatory Authority found it The Bond Buyer 40 Some Santee Cooper Lawsuits The Fed’s actions to buy short-term failed on various occasions to munis clearly is having a meaning- purchase municipal securities 5.0 ful impact on this market. for its customers at a fair and Are Nearing Settlement Deals To Maturity Market participants took the reasonable price. 5 4.3 3.83 Down 0.34 BY SHELLY SIGO Beaufort Division of the United signal that the Federal Reserve WEB EXCLUSIVES 3.6 States District Court of South would be authorized to purchase While some legal proceed- Carolina on Jan. 31, 2018. all types of municipal bonds under CALIFORNIA STATE AGENCIES HAVE 3.0 ings across the country have The Glibowski suit alleged the $2 trillion package the Trump received official word that 2.3 To Par Call been postponed due to the nov- that its class members lost more administration has agreed to with they’ll have to tighten their 3.28 Down 1.00 el coronavirus outbreak, South than $3 billion as a result of the the Senate. However the moves the belts as the state grapples with 1.7 Carolina-owned Santee Coo- project. Fed took on Monday to include the COVID-19 pandemic. 03/12 03/17 03/20 03/25 per is on track, so far, to get a Turn to Santee Cooper page 6 Turn to Dramatic page 2 IN ANTICIPATION OF REVENUE court-approved global settle- 5.5 ment for two of its complex declines stemming from 5.0 COVID-19, New Jersey Gov. class-action lawsuits. ONLINE 4.5 Phil Murphy’s administration If the global deal gets done, is freezing nearly $1 billion in 4.0 though, the state utility formal- discretionary spending. 3.5 ly known as the South Caro- 3.0 lina Public Service Authority PODCAST: CHRIS BRIGATI OF 2.5 still faces pressures from oth- Advisors Asset Management 2.0 er lawsuits that resulted from talks about market strategies 1.5 canceling two nuclear reactors and adapting to the realities of MFJDNOSAJJMA while still under construction, today. John Hallacy hosts. Complete market coverage appears on page 2 including a federal securities class-action suit filed by an in- vestor in Santee Cooper’s mini- bond program. Judge Jean Toal on March 17 preliminarily approved a $520 million settlement filed by a class of ratepayers led by Jes- sica S. Cook in the Hamilton County Court of Common Pleas on Aug. 22, 2017, and a feder- Bloomberg News al class-action complaint led Senate Majority Leader Mitch McConnell, R-Ky., described the corona- by Timothy Glibowski in the virus legislation as “emergency relief,” not a stimulus package. 001_BB032620 1 3/25/2020 5:09:14 PM Market News Thursday, March 26, 2020 s 2 The Bond Buyer Dramatic Rally Reverses Recent Coronavirus-Driven Selloff Continued from page 1 County School District, S.C., (Aa1/NR/NR/ spending requirements,” said Jeffrey Lipton, the buy-side for a welcome change. “With NR) decided to brave the market Wednesday managing director and head of muni research a healthier tone, munis could demonstrate variable rate demand notes had already start- and competitively sold a sharply downsized and strategy at Oppenheimer. better relative performance against UST.” ed the rally. general obligation bond issue. BofA Securi- Lipton said that while it is difficult to de- Ryan Swift, US Bond Strategist at BCA This all came as ICI reported more than ties won the $75 million of GOs, originally fine newly authorized Fed capabilities in sim- Research echoed some of those sentiments. $20 billion of outflows Wednesday, largely sized at $124.61 million with a true interest plistic terms, the U.S. is now going through The Fed measures to mitigate the negative surpassing previous outflows. cost of 2.73%. an atypical recession that requires atypical impacts of a credit shock to the market has But early trades of New York City GOs The GOs were priced to yield from 2% Fed intervention. been evident. started the move. GOs in 2028 opened the with a 5% coupon in 2021 to 3.08% with a “Whether or not the Fed’s new-found au- “The Fed has set up facilities to back- day and traded at 2.00%. The yield on the 3% coupon in 2040. thority for munis can stem the massive liqui- stop commercial paper and short-maturity 10-year at the close was 1.89% (-75 basis The market moved with the realization that dations from mutual funds and ETFs for an municipal debt. It also announced yesterday points) on the ICE curve, 2.08% (-61) on the Fed was here with liquidity. extended period — only time will tell, but morning that it will, in conjunction with the BVAL and MMD stood at 1.94% (-65) from “In our view, expanded Fed support for the we are optimistic,” he said. The government Treasury department, enter the investment previous day trading. municipal bond market as part of an unprec- and Fed measures, they believe, “will bol- grade corporate bond market out to the 5-year Other trades showed how rapidly the mar- edented, more broadly-defined open-ended ster muni market and credit conditions and maturity point, effectively back-stopping a ket was moving to lower yields: quantitative easing program (including the we can expect tax-exempt yields to make large portion of corporate issuance,” Swift Massachusetts GOs, 4s of 2021, traded at kitchen sink) should provide an important fa- valid attempts to retrace part of their recent said. “The Fed is also directly purchasing 1.90%, Texas Transportation Commission cility that would help to ensure the availabil- advances, but with directional volatility and large amounts of Agency MBS in an effort 5s of 2026 traded at 1.93%, Massachusetts ity of adequate liquidity at a time of historic an unlikely return to their historical lows (al- to tighten the spread between the mortgage GOs, 5s of 2030, at 2.25%, Chicago GOs, 5s market and economic disruption when many though they could be tested) any time soon.” rate and Treasury yields.” of 2031, 10-year call, at 5.90%, Connecticut municipal governments are struggling to He said the market would also expect He also noted that the Fed’s measures to GOs, 4s of 2038, land at 4.04%. balance their essential service needs against the pace of outflows to abate with possible guarantee some risky debt can help solve Meanwhile, in the primary, the Beaufort swelling coronavirus-related healthcare inflows. And further, the market could an- some problems related to a credit shock.
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