Municipals end unchanged as new issues hit market; Fairfax County offers $371.47 million deal

By Sheri Kasprzak

New York, Jan. 26 – Municipals closed a busy session unmoved with the 10-year benchmark triple-A yield at 1.84% and the 30-year at 2.81%, traders reported.

Meanwhile, Treasuries improved ahead of the Federal Open Market Committee’s January meeting.

The 10-year benchmark Treasury note yield ended the session 2 basis points lower at 2.01%, and the 30-year bond yield fell by 1 bp to 2.79%. The five-year yield shrank 2 bps to 1.45%, and the two-year yield fell by 3 bps to 0.85%.

Chicago BOE ahead

The market will now turn its attention to the Chicago Board of Education’s $875 million general obligation bond offering (B1/B+/B+).

The deal is slated to price Wednesday.

“Of course, the scheduled $875 million Chicago public school issue will be the focus of market watchers, with recent bankruptcy talk from the Illinois governor and some legislators clouding prospects for the issue,” Alan Schankel, managing director with Janney Montgomery Scott LLC, said in a note.

“Although some of the proceeds will go towards capital improvements, about half will refinance outstanding debt, including variable-rate bonds as well as principal and interest due in the next two years, a financing technique known as ‘scoop-and-toss.’ In a prime example of kicking the can down the road, the bonds mature in 2035, 2040 and 2044, and will not begin to amortize until 2034, unusual for municipal bonds, which typically begin to amortize immediately through serial maturities or sinking funds.”

J.P. Morgan Securities LLC and Barclays lead the syndicate offering Wednesday’s deal.

The offering is split into two tranches, $795,515,000 of series 2016A bonds and $79,485,000 of series 2016B taxable bonds due Dec. 1, 2033.

Fairfax bonds top issues

Leading Tuesday’s new-issue action, Fairfax County, Va., hit the market with $371.47 million of series 2016A public improvement and refunding bonds.

The bonds (Aaa/AAA/AAA) were offered competitively. The issuer did not immediately respond to requests for the winning bidder Tuesday.

The bonds are due 2016 to 2035 with 2% to 5% coupons and yields from 0.30% to 2.46%.

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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