Municipals improve but underperform Treasuries; market awaits $5.4 billion of new-issue supply

By Sheri Kasprzak

New York, Jan. 25 – Yields on top-rated municipals fell as much as a basis point ahead of more than $5.4 billion of supply this week, traders said.

Munis were strong, but the market underperformed Treasuries, which were buoyed by another dip for oil prices and stocks. The 30-year bond yield edged 3 bps lower.

Chicago BOE on tap

The week’s largest offering is also one of the most controversial.

The troubled Chicago Board of Education is slated to price $875 million of unlimited tax general obligation bonds Wednesday in a deal that will likely face some difficulties as talk of a state takeover of the district and a possible bankruptcy swirl.

These pressures resulted in a Standard & Poor’s downgrade to B+ from BB and a Fitch downgrade to B+ from BB+ last week. Moody’s Investors Service dropped the board’s debt to B1 from Baa3 in December. Moody’s no longer rates the board.

On Monday, the board’s 5.25% of 2026 ended the day at 7.181% after closing Friday at 6.288%.

At the close of last week, the board’s 5% 2029s were seen at 7.257% after closing Thursday at 7.457%.

The board plans to offer its G.O. bonds through senior managers J.P. Morgan Securities LLC and Barclays.

The deal includes $795,515,000 of series 2016A bonds due 2035, 2040 and 2044 and $79,485,000 of series 2016B taxable bonds due Dec. 1, 2033.

Proceeds will fund capital improvements and refund variable-rate debt and other bonds.

Fairfax readies bonds

Moving to the competitive market, Fairfax County, Va., is in the market Tuesday with $371.47 million of public improvement and refunding bonds (Aaa/AAA/AAA).

The bonds are due 2016 to 2035.

Proceeds will be used to finance capital improvements throughout the county and refund its series 2008A, 2009A, 2011A, 2012A, 2013A and 2014A bonds.

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