march 21, 2017 · municipal market march 21, 2017 2 diary banking panel senators make bipartisan...
TRANSCRIPT
Tuesday
March 21, 2017
March 21, 2017
Bloomberg AAA Benchmark Yields
DESCRIPTION CURRENT PREVIOUS NET CHANGE
BVAL Muni Benchmark 1T 0.86 0.86 0
BVAL Muni Benchmark 2T 1.07 1.07 0
BVAL Muni Benchmark 3T 1.28 1.28 0
BVAL Muni Benchmark 4T 1.48 1.48 0
BVAL Muni Benchmark 5T 1.68 1.69 -0.01
BVAL Muni Benchmark 6T 1.87 1.88 -0.01
BVAL Muni Benchmark 7T 2.05 2.06 -0.01
BVAL Muni Benchmark 8T 2.19 2.20 -0.01
BVAL Muni Benchmark 9T 2.32 2.33 -0.01
BVAL Muni Benchmark 10T 2.42 2.43 -0.01
BVAL Muni Benchmark 20T 3.05 3.06 -0.01
BVAL Muni Benchmark 30T 3.19 3.20 -0.01Source: GBY<GO>, GC I493 <GO>
College Debt Trades Rich; Seek Smaller Names: ofABBy Jordyn HolmanWhile large research schools are on many investors’ radar, there may be smaller, less prominent institutions that are good credits and "worth a second look,” the Bank of America Merrill Lynch municipal team, led by , said in a note.Philip Fischer
It’s difficult at this time to find value in the higher-ed sector due to tight valuations compared to U.S. Treasuries; year-to-date A-rated option-adjusted spreads have widened just 4 basis points while both AAA and AA-rated spreads have remained stagnant.
Investors can glean innovating science, technology, engineering, math (STEM) institutions by looking at the ones granted the most patents for inventions. Many times these universities also were top issuers of debt, Bank of America noted.
Public state systems were among the institutions with the most debt outstanding. This paid off for the ten-campus sized University of California, the largest debt issuer with $4.8 billion. The school received 489 new patents in 2015.
This outpaces Massachusetts Institute of Technology, with the second most patents at 278 and $503 million in debt outstanding.
Harvard College was the largest privater issuer with $3.2 billion in debt outstanding, and the Ivy League school was granted 106 patents in 2015.
The success of STEM universities can trickle down to the cities where they are located as those places stand to benefit financially, the researchers said.
“The cities with large STEM populations will see their economies grow,” Bank of America said in the note. “Similarly, those universities with large science and research departments will become more and more prominent.”
STATE YIELD SPREAD TO AAA CHANGE
CA 2.69 25 +0.02
FL 2.53 10 +0.01
IL 4.61 218 +0.02
NY 2.42 -1 +0.03
PA 3.05 62 +0.03
TX 2.59 16 +0.01
MUNICIPALITY AMOUNT
San Jose Airport CA $641 million Rev
Johns Creek GA $40 million GO
Puyallup SD #3 WA $188 million GO
Massachusetts Transportation $642 million Rev
Energy Northwest WA $500 million RevSource: Bloomberg CDRA <GO>
AMOUNT OUTSTANDING
($MLNS)
MATURING NEXT 30
DAYS ($MLNS)
ANNOUNCED CALLS NEXT 30 DAYS ($MLNS)
3,589,970 8,246 8,210Source: MBM<GO>
Benchmark States 10-Year
30-Day Supply Fixed: $8.6 Bln (LT)30-Day Supply Fixed: $193 Mln (ST)Sold YTD Fixed: $56.6 Bln (Neg LT)Sold YTD Fixed: $18.4 Bln (Comp LT)Sold YTD Fixed: $4.4 Bln (ST)
Primary Fixed Rate
MSRB: $10.1 BlnPICK: $17.2 Bln
Secondary Market
SIFMA Muni Swap Rate: 0.71%Bloomberg Weekly AAA Rate: 0.714% Bloomberg Weekly AA Rate: 0.743% Daily Reset Inventory: $1.4 Bln Weekly Reset Inventory: $1.6 Bln
Variable Rate
In the Pipeline
Size of Market
Municipal Market 2 March 21, 2017
Diary
Banking Panel Senators Make Bipartisan Call for Growth ProposalsBy Elizabeth DexheimerCalling all Wall Street lobbyists and consumer advocates: the Senate Banking Committee wants your best ideas for boosting the U.S. economy, regardless of your politics.
Senators of Idaho, the Mike Crapopanel’s Republican chairman, and
of Ohio, its top Sherrod BrownDemocrat, said on March 20 that they plan to accept proposals through April 14 for policies designed to boost growth, help consumers and enable the economy to operate “in a more effective and efficient manner.”
“We welcome input from all interested stakeholders,” Crapo said in a statement announcing the request. The lawmakers didn’t outline specific topics of policies they’d like to pursue.
Submissions should offer three to five ideas and include a brief description of the proposals as well as their impact on economic growth, consumer market
participants and financial companies, the lawmakers said. Participants are also encouraged to provide “legislative language,” implying the text they’d like to see included in a bill.
The formal process of requesting proposals, unusual in Congress, gives banks, trade groups, consumer advocates and anyone else with a stake in financial regulation a chance to weigh in on what changes they’d like to see. It comes amid calls from Republicans and President to undo parts Donald Trumpof the Dodd-Frank Act, which they blame for damping economic growth.
While Trump has said rewriting financial rules is a priority, changes through Congress will be difficult because most legislation requires Democratic support. And Democrats say that existing laws are needed to prevent another financial crisis and protect investors.
“I look forward to proposals that will
create real economic growth and jobs, and help reverse years of stagnant wages and widening inequality,” Brown said in the statement.
Crapo and Brown have repeatedly said they’d like to work together on bipartisan legislation. That could limit what sort of policies, including changes to Dodd-Frank, are pursued. In the House, Financial Services Committee Jeb
, a Texas Republican, is Hensarlingworking on a plan that would scrap most of the 2010 law. Brown and other Democrats have said they would oppose much of what Hensarling has proposed.
The request for proposal isn’t limited to any specific topic or area. Submissions may also address, for example, rules that aren’t mandated by Dodd-Frank, investments in infrastructure or policies for so-called shadow banks, a term for financial institutions that typically operate outside the reach of banking regulators.
According to
Congress has no interest in revisiting the bill passed last year to help Puerto Rico and extending the period that the island is protected against most litigation, said a congressional aide familiar with conversations between House Speaker
and interested parties. House Paul Ryanlawmakers may call another hearing on the status of oversight panel created last year to help restructure Puerto Rico debt, aide says.
The House Natural Resources Subcommittee on Indian, Insular, and Alaska Native Affairs has scheduled a hearing for 10 a.m. on March 22 on "The Status of the Puerto Rico Electric Power Authority Restructuring Support
No to Puerto Rico Stay Agreement.” Witnesses invited include Puerto Rico Governor Ricardo Rossello,oversight board chairman Jose Carrionand oversight board member Ana
.Matosantos— Kasia Klimasinska
Investor speculation about the scale of the losses Puerto Rico will foist on bondholders caused the price of the island’s most active bond to continue to slide on March 20 in the heaviest trading in nearly four months. More than $41 million of general-obligation bonds maturing in 2035 were exchanged, the most since Nov. 29. While the price
Island's Bonds Slide
slipped as low as 61.35 cents on the dollar, for trades over $1 million it held to at least 64.53, according to data compiled by Bloomberg.
— Christopher Maloney
The California Assembly passed a bill that would ask voters in June 2018 to approve issuing $3.1 billion in general-obligation bonds to finance parks and water programs. The bill must be passed by the State Senate and then approved by the governor. Voters have approved three park bonds since 2000. A report in 2012 estimated $4.9 billion in unmet needs at state and local parks.
— Romy Varghese
California Park Borrowing
Municipal Market 4 March 21, 2017
Long-Term Bond Sales Results
SELLING DATE
ISSUE STATE RATING TAXAMT
($Mlns)1 YEAR 5 YEAR 10 YEAR 20 YEAR STATUS TYPE
SENIOR MANAGER
ENHANCEMENT
03/20Saint Michael Albertville
MN Aa2 // N 35.713.000/2.600
Awarded CompRobert W. Baird & Co Inc
SD CRED PROG
03/20Washoe Co Sd - B -Ref
NVAa3e/AA/
N 26.895.000/1.850
5.000/2.650
3.750/99.500
Awarded CompMorgan Stanley & Co Llc
03/20 Tulsa Co Isd #9 OK /AA+/ N 26.002.000/1.930
Awarded Comp Jefferies Llc
03/20 Oconee Cnty Sd -A SC Aa1e // N 14.504.000/0.900
5.000/1.730
Awarded Comp Umb Bank N.A. SCSDE
*Moody's/S&P/Fitch
Most Active Bonds
DESCRIPTION STATE DATED COUPON MATURITY VOLUME PRICED AVERAGE YIELD AVERAGE NO. OF TRADES
Wa Hlth Fac-A-Rev WA 04/06/17 5.000 10/01/47 63,350,000 110.572 3.770 17
California CA 03/14/17 2.000 08/01/17 42,775,000 100.452 N.A. 17
Riverside Co-Trans CA 07/01/16 3.000 06/30/17 37,650,000 100.644 0.716 15
Ca Infra Eco Dev Bk-A CA 12/01/11 N.A. 04/01/38 35,825,000 99.986 N.A. 14
Ca Infra Eco Dev Bk-A CA 12/01/11 N.A. 04/01/38 35,600,000 100.000 N.A. 10
Ca Infra Eco Dev Bk-A CA 12/01/11 N.A. 04/01/38 31,835,000 99.992 N.A. 12
Indiana Co Indl Dev PA 04/04/17 1.550 04/01/19 29,800,000 100.000 1.549 16
Ny Urban Dev Corp-A NY 03/23/17 5.000 03/15/24 28,860,000 117.655 2.252 18
Ny Urban Dev Corp-A NY 03/23/17 5.000 03/15/27 27,510,000 120.006 2.699 28
Ny Urban Dev Corp-A NY 03/23/17 5.000 03/15/28 25,500,000 119.191 2.784 8
Ny Urban Dev Corp-A NY 03/23/17 5.000 03/15/23 25,465,000 116.635 2.031 47
Antelope Vly Clg-A CA 03/30/17 4.000 08/01/46 23,015,000 100.649 3.919 8
New York Urban Dev-A NY 03/23/17 5.000 03/15/34 23,000,000 114.615 3.271 6
Monroe Cnty Indl Dev NY 04/05/17 3.875 07/01/42 22,195,000 98.760 3.953 24
Los Angeles-B-Trans CA 07/07/16 3.000 06/29/17 22,075,000 100.658 0.590 13
Boulder Vly Sd #Re2-A CO 04/04/17 5.000 12/01/31 22,000,000 117.869 2.951 6
Antelope Vly Clg-A CA 03/30/17 5.250 08/01/42 21,250,000 115.737 3.358 8
New York City Ny Tran NY 03/17/16 5.000 07/15/25 20,885,000 118.899 2.471 34
Gulf Coast Indl Dev TX 12/06/12 N.A. 11/01/41 20,505,000 100.000 N.A. 6
Ny St Urban Dev-B NY 03/23/17 2.100 03/15/22 20,500,000 99.988 2.102 7
California-Ref CA 03/14/17 5.000 08/01/29 20,210,000 116.886 2.924 7
Ny Urban Dev Corp-A NY 03/23/17 5.000 03/15/22 20,180,000 115.273 1.780 18
Ny Urban Dev Corp-A NY 03/23/17 5.000 03/15/25 20,125,000 118.694 2.410 14
Results of Sales
Trading
Commentary
Municipal Market 5 March 21, 2017
Commentary
How Much Can You Cut Taxes? Don't Ask Kansas: Barry RitholtzBy Barry RitholtzHere is a sentence I never thought I'd write: is right.Art Laffer
I refer specifically to tax incentives. Laffer was recently asked about the mess that is Kansas, and he responded by saying Governor Sam Brownbackhad the right idea in cutting taxes. He just failed to cut taxes massively enough.
When it comes to supply-side economics, go bigly or go home.
This is actually a nuanced change in position for Laffer, the creator of the Laffer curve and the father of supply-side economics. It used to be you couldn't get him to say a negative word about any tax cut. The obvious logical conclusion to his argument that the tax cuts in Kansas were not large enough is that small tax cuts don’t really make much of a financial difference to enough people to matter economically. Indeed, modest tax cuts fail to create sufficient economic incentives for people to change their behavior enough to make up for lost tax revenues. The supply-side magic that Laffer has long advocated is, by his own admission, unsupported.
Consider the recent tax history of Kansas: In 2010, Brownback, then a U.S. senator, ran for governor on a platform of slashing taxes for business owners and lowering personal income tax rates. He was advised on his tax plan by Laffer and the American Legislative Exchange Council, a conservative group that specializes in promoting draft legislation.
Brownback promised tens of thousands of new jobs and an economic renaissance in Kansas. He was elected, pushed his legislative agenda through the Statehouse, and signed his bill in May 2012. It initially lowered the top personal income tax rate to 4.9 percent (now 4.6 percent) from 6.45 percent, and
eliminated income tax on profits for owners of limited liability companies, subchapter S corporations and sole proprietorships.
The results have been disastrous for Kansans. Massive budget shortfalls, huge cuts to basic services such as road maintenance, and slashing of education budgets became annual events. You can not blame broader conditions for the
“Claims [that tax cuts] pay for themselves are intellectually dishonest nonsense. ”
state’s weak agricultural- and energy-based economy; as my Bloomberg View colleague pointed out, Justin FoxKansas lags its economically similar neighbors in nearly every major category: job creation, unemployment, gross domestic product, taxes collected. Pretty much across the board, the gap between Kansas and nearby states has widened, and it has been getting even wider lately.
So when Laffer made the claim that the Kansas tax cuts were not big enough, he was correct — but not for the reasons he claims. Theoretically, incremental changes in tax policy can change the
behavior of homo economicus. The problem is modest incentives fail to rise to the level needed to change the behavior of homo sapiens.
Why is this? A tax cut of only a few percent is not worth the attempt to change people's inertia or habits. It is doubtful that it is going to nudge people to make big new investments or hire new workers, or attract new residents to your state.
Demand does those things; incremental tax policy does not.
Consider the tax rates that might generate the maximum amount of revenue for state coffers. A 100 percent tax rate removes any incentive to work; a tax rate of 0 collects no tax. Somewhere in between is an optimal tax rate that maximizes state tax revenues.
What Laffer originally got right is that when nations tax citizens at confiscatory levels — think 90 percent — behavior changes dramatically: People won’t work, or they'll seek tax shelters, or, as the Rolling Stones did, they'll simply move to a friendlier venue (preferably with better weather).
Over the years, supply-siders seem to have extrapolated Laffer's original thought to infinity. This is why the tax cuts of Ronald Reagan and George Bush were advocated as generators of more revenue than they cost. As the revenue portions of our deficits show, they don’t. Not every tax cut pays for itself — indeed, most do not.
A fair argument for incremental tax cuts is about the proper level of taxation. Claims they pay for themselves are intellectually dishonest nonsense.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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Municipal Market 6 March 21, 2017
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Puerto Rico Bondholders Ask: Who's First?
Andrew Scurria@AndrewScurria
Fight between Puerto Rico GO and Cofina bondholders intensified in a big way over the weekend wsj.com/articles
/puert… #munilandDetails
The Wall Street Journal's bankruptcy reporter tweets a link to his story on Puerto Rico: "Puerto Rico’s government reversed its stance on a $30 billion debt dispute while hedge funds escalated the continuing legal fight between competing bondholder groups.'' Island officials said on March 17 they would urge a federal judge to rule by April 30 on the validity of $17 billion in sales-tax bonds, the Journal reported.
— Joe Mysak
Bloomberg Brief:Municipal Market
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