Municipals rally as stocks dive; 30-day visible supply at $11.7 billion; U of Texas bonds set

By Sheri Kasprzak

New York, Jan. 4 – Municipals rounded out Monday on a stronger note. Yields on some maturities fell by 6 basis points as U.S. stocks declined on weaker Chinese stocks, market insiders reported.

The market cranked right back up after the holiday season, with $11.7 billion of new issues on the calendar for the next 30 days.

Municipals outperformed Treasuries Monday. The 30-year Treasury bond and 10-year Treasury note yields fell 3 bps on the day.

U of Texas tops offerings

Heading up the week’s new-issue slate, the University of Texas System will come to market with $450 million of series 2016 revenue financing system bonds through BofA Merrill Lynch.

The bonds (Aaa/AAA/AAA) are scheduled to price Thursday.

The offering includes $250 million of series 2016A taxable bonds due 2046 and $200 million of series 2016B green bonds.

Proceeds will fund capital improvements and refund the system’s series A and B commercial paper notes.

The university system last came to market with revenue financing system bonds in November 2014. The system then sold $250.7 million of bonds due 2015 to 2037 with 2% to 5% coupons and yields from 0.12% to 5.70%.

Back in December, the system priced $243.21 million of permanent university fund bonds via Wells Fargo Securities LLC.

That deal included $126 million of series 2016C taxable bonds and $117.21 million of series 2016A tax-exempt bonds.

The 2016C bonds are due July 1, 2045, have a 3.78% coupon and priced at par. The 2016A bonds are due 2017 to 2035 with 3.25% to 5% coupons and 0.62% to 3.33% yields.

The university system utilized the proceeds from that deal to refund taxable commercial paper notes.

Orange County bonds set

Also coming up this week, Orange County, Calif., is ready to price $334,305,000 of series 2016A taxable pension obligation bonds (/AA/AA).

Stifel, Nicolaus & Co. Inc. will price the bonds on Thursday.

The county intends to prepay fiscal year 2016-2017 pension obligations with the proceeds.

“In exchange for the prepayment, [Orange County Employees Retirement System] offered plan sponsors, including the county, a 5.8% discount on the employer contribution,” said Suzanne Luster, public finance director for Orange County, in an interview Monday.

“The county expects to achieve approximately $17 million in budget savings. The bonds will be paid back in fiscal year 2016-2017 through regular collection of retirement expenses from county departments every two weeks.”

In order for the county to achieve the discount, Luster noted, the prepayment must be received by Jan. 15.

The bonds mature June 30, 2017, Luster said.

The county hit the market in January 2015 with a similar deal. It priced $339,625,000 of pension obligation bonds due 2015 to 2016 with 0.425% to 0.80% coupons all priced at par. Since this offering, Standard & Poor’s has upgraded the county’s obligation bonds to AA from AA-.

Kansas campus deal ahead

Rounding out the top deals of the week, the Public Finance Authority of Wisconsin is scheduled to bring $333.18 million of lease development revenue bonds for the Kansas University Campus Development Corp. on Thursday.

This is the first time the authority is selling bonds on behalf of the corporation, according to Michael LaPierre, the authority’s program manager, in a short interview Monday.

LaPierre said it is too soon to tell how recent interest rate hikes will impact the offering.

The bonds (Aa2) will be offered through J.P. Morgan Securities LLC.

The bonds are due 2018 to 2036 with term bonds due in 2041, 2046 and 2051.

Proceeds will finance upgrades and improvements to classrooms, student life facilities and other campus projects.

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