Bloomberg Municipal Market Q1 StatBook


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Bloomberg Municipal Market Q1 StatBook

  1. 1. Sponsored byMUNICIPALMARKET1Q2013 STAT BookApril 2013
  2. 2. Quarter in reviewIt looked like recovery in2013, but looks are deceiving.Even as tax revenue rose andhousing prices climbed, issu-ers had to deal with pensionfunding and swap termina-tions. Some municipalitiescontinued the long slogthrough Chapter 9 bankrupt-cy, while others consideredtheir progress.Page 2The RatioThey’re a buy, they’re a buy,they’re a buy. That’s whatsome analysts say when thetax-exempt/Treasury ratioclimbs over 100 percent, asit did during the first quarter.Not everyone is convinced.The average ratio since 2001is about 92 percent.Page 4YIELDS CLIMBStates and municipalities paidmore to borrow as investorspulled money out of mutualfunds in advance of tax day.And then yields dropped.Page 4JPMorgan, BofA leadThe top 10 underwritershandled more than 70 per-cent of the municipal marketduring the first quarter, withJPMorgan and Bank ofAmerica Merrill Lynch captur-ing the top spots, and morethan 30 percent of issuanceoverall. The banks handled36 percent of the competi-tive market, 30 percent of thenegotiated. Page 5VOLUME HIGHERStates and localities sold$85.3 billion in securities dur-ing the first quarter, up from$80 billion in 2012’s first threemonths. About 40 percentwas for refunding. And $2.4billion carried some form ofbond insurance. Page 6coupon dispersionTop-rated 10-year municipalbonds yield 1.75 percent.Yetin the first quarter, almost 40percent of the coupons soldwere 5s; 18 percent were4s. High yield, i.e., 6 percentand higher, made up only 1percent of the universe ofcoupons. Page 6by the billion$1 billion bond issues used tobe a big deal. In the first quar-ter, issuers sold six billion-dollar plus transactions. Moreare on the calendar. Page 6where to find itThe lowest-rated bonds con-tinued to provide the biggestreturns in the first quarter,according to Barclays PLC.Investors looking for yieldfound it in tobacco and indus-trial development bonds.Page 7nuveen topsThe Nuveen High YieldMunicipal Bond Fund earned2.14 percent in the first quar-ter and outperformed all otheropen-ended, national munifunds; the Nuveen CaliforniaHigh Yield Municipal BondFund was tops among single-state open-ended funds.Page 7ContentsFirst Quarter In ReviewIrksome questions remained for themunicipal market during the first quarterof 2013.On the surface, reassurance reignedafter last-minute negotiations resolvedthe “fiscal cliff’’ cuts. Keeping in mind thatmunicipal finances are particular and spe-cific and idiosyncratic to a fault and resistgeneralization, what traders call a “bettertone’’ prevailed.States and municipalities, with excep-tions, appeared to be in recovery mode.Businesses seemed to be hiring. Tax rev-enue and housing prices rose along withthe stock market. Issuers took advantageof long-term interest rates hovering below4 percent to refinance older debt andraise money for long-deferred mainte-nance or new projects.At least three topics and one crisis lin-gered throughout the quarter. Issue Onewas public pensions. Were they so gener-ous, and were lawmakers also so fecklesswhen it came to putting aside moneyenough to pay them, that they would atlast bankrupt municipal governments?This was a very California problem, al-though examples exist coast to coast.Then there were interest rate swaps.We still don’t know how many swapsmarket participants engaged in duringthe past decade or so.Yet not a weekwent by without some issuer disclosingthat a good chunk of a borrowing was go-ing to pay to terminate a swap, or seriesof swaps.Finally, consider capital appreciationbonds. State lawmakers in California andTexas looked at why school districts soldsuch things, which allow the issuer toborrow millions, defer debt service, andrepay, after 30 or 40 years, billions. Someof them were outraged by what they saw,and want to prohibit their use.Crisis rarely visits the municipal market.When it does, it tends to stick around. Thisis especially true of bankruptcy, which isneither quick nor easy for those govern-ments who seek Chapter 9 protection.During the quarter, Stockton (which wentbust in 2012), San Bernardino (2012) andJefferson County (2011) were each men-tioned in at least 20 editions of the Brief.They will feature in many more, as eachseeks to penalize bondholders. Analystsare looking at whether the municipalitieswill succeed in reducing the amount ofprincipal bondholders are owed, and alsoif public pensions will be cut.The background music to all of this,as it has been since the creation of thefederal income tax a century ago, wasthe future of tax-exemption. Will it becapped for certain investors? Will it beeliminated altogether?— Joe MysakBloomberg Brief Municipal Market Newsletter Ted Merz Executive Editor 212-617-2309 Bloomberg News William Glasgall Managing Editor 212-617-3023 Municipal Market Joe Mysak Editor 212-617-2323 Reporter Brian Chappatta 212-617-0698 Contributing Sowjana Sivaloganathan, Analysts Bert Louis Newsletter Nick Ferris Business Manager 212-617-6975 Advertising 212-617-6975 Reprints & Lori Husted Permissions 717-505-9701To subscribe via the Bloomberg Terminal type BRIEF<go> or on the web at contact the editors:munimarket@bloomberg.netThis newsletter and its contents may not be forwardedor redistributed without the prior consent of Bloomberg.Please contact our reprints and permissions grouplisted above for more information© 2013 Bloomberg LP. All rights reserved. 1 2 3 4 5 6 7 8 04.24.13 Bloomberg Brief | Municipal Market 2
  3. 3. Assured GuarantyFile: 4156_Bloomberg Q1 Muni Market Quarterly StatbookInsertion: 4.XX.2013Due: 4.22.13Size: 7.5 X 8.8”NO ONE CANPREDICT THE FUTUREBUT $12 BILLIONCAN GUARANTEE IT.With over a quarter century ofexperience, and more than $12 billionin claims-paying resources, AssuredGuaranty is the proven leader inmunicipal bond insurance.And as owners of our insuredHarrisburg, PA or Stockton, CAbonds can attest, investors’principaland interest payments are paid onschedule, even when an issuer defaults.We’ve successfully reducedfinancing costs for the 11,000 municipalcredits in our portfolio because we offerinvestors greater market liquidity, thecomfort of our ongoing surveillance,and the safety of our unconditional,irrevocable guaranty.In times like these, investorscrave certainty. At Assured Guaranty,certainty is precisely what we deliver.Owners of Harrisburg bonds we’ve insured haven’t spent the last four years in workout talks.When you’re paid in full, there’s nothing to work out.AssuredGuarantyMunicipalCorp.andAssuredGuarantyCorp.(andaffiliates),NewYork, 1 2 3 4 5 6 7 8 04.24.13 Bloomberg Brief | Municipal Market 3
  4. 4. Interest RatesTax-Exempt/Treasury Ratio Surged Over 100% Before Tax Day as Yields JumpedMake an IMpact wIthBlooMBerg BrIef contentBloomberg Briefs provide dedicated licenses to reuseour content to help your business. We offer a full suite ofproducts and services ranging from hardcopy and electronicreprints to plaques, permissions/licensing and find the solution that is right for you, contact us today at: 800 290 5460 x 100, email: bloombergbriefreprints@theygsgroup.comThe 10-year muni-Treasury ratio rose toa 2013 high in March, as investors beganwithdrawing money from municipal mutualfunds to pay tax bills before the April 15 fil-ing deadline. The lack of demand pushedyields on state and local governmentbonds higher than those on their federalcounterparts. The ratio was more than100 percent for 13 straight trading daysthrough March 29, the longest stretchsince September, Bloomberg data show.A higher ratio means AAA munis are rela-tively cheap to U.S. Treasuries. The gaugefell to 86 percent on Jan. 25, the lowestthis year. The average ratio since 2001 isabout 92 percent.— Brian ChappattaTen-year AAA municipal bond yieldsrose to the highest in 11 months onMarch 14, as investors withdrew moneyfrom municipal mutual funds “ahead ofschedule,’’ according to Chris Mauroat RBC Capital Markets. In 2012, yieldsrose in March, peaking on March 22,Bloomberg data show. In 2011, yieldshalted their rise on April 8. In 2010,yields reversed direction on April 7.“Seasonal municipal fund outflowstypically materialize in the second andthird weeks of April, not in early March,’’Mauro wrote. “A strong equity market,continued low muni yields, and a fearof rising interest rates have combinedto diminish the attractiveness of themunicipal asset class.’’— Brian ChappattaMuni/Treasury Ratio Rises Above 100% During Tax Season10-Year Muni Yields Climb to 11-Month High in March 1 2 3 4 5 6 7 8 04.24.13 Bloomberg Brief | Municipal Market 48590951001051101/1/13 1/15/13 1/29/13 2/12/13 2/26/13 3/12/13 3/26/13Muni/TreasuryRatioDateMuni/Treasury Ratio Rises Above 100% During Tax SeasonMuni/Treasury RatioSource: Bloomberg1.651.71.751.81.851.91.9522.052.11/1/13 1/15/13 1/29/13 2/12/13 2/26/13 3/12/13 3/26/13Yield(%)Date10-Year Muni Yields Climb to 11-Month High in MarchYieldSource: Bloomberg
  5. 5. UnderwritersQ1 2013 Position Underwriter Issuance ($billions) % Issuance1 JP Morgan 12.52 16.72 Bank of America Merrill 11.19 14.93 Citigroup 7.93 10.64 Morgan Stanley 4.19 5.65 Wells Fargo Bank 4.19 5.66 RBC Capital 3.81 5.17 Barclays 2.86 3.88 Robert W. Baird 2.66 3.69 Stifel Nicolaus 2.64 3.510 Goldman Sachs 2.20 2.9Total 74.96*excludes derivatives & notes, full credit to bookrunning managerOverall Muni Market 2013: Top 10 Underwriters Numbers run as of April 17, 2013Q1 2013 Position Underwriter Issuance ($billions) % Issuance1 Bank of America Merrill 3.56 19.22 JP Morgan 3.17 17.13 Citigroup 3.13 16.84 Wells Fargo Bank 1.53 8.25 Robert W. Baird 1.42 7.76 Morgan Stanley 0.56 3.07 Janney Montgomery 0.51 2.78 Raymond James 0.46 2.59 Goldman Sachs 0.38 2.110 Hutchinson Shockey 0.36 1.9Total 18.57*excludes derivatives & notes, full credit to bookrunning managerCompetitive Muni Market 2013: Top 10 Underwriters Numbers run as of April 17, 2013Q1 2013 Position Underwriter Issuance ($billions) % Issuance1 JP Morgan 9.35 16.62 Bank of America Merrill 7.63 13.53 Citigroup 4.80 8.54 Morgan Stanley 3.63 6.45 RBC Capital 3.48 6.26 Barclays 2.77 4.97 Stifel Nicolaus 2.57 4.68 Wells Fargo Bank 2.66 4.79 Jefferies 1.83 3.210 Goldman Sachs 1.82 3.2Total 56.39*excludes derivatives & notes, full credit to bookrunning managerSource: BloombergNegotiated Muni Market 2013: Top 10 Underwriters Numbers run as of April 17, 2013 1 2 3 4 5 6 7 8 04.24.13 Bloomberg Brief | Municipal Market 5
  6. 6. IssuersIssue StateSaleDateBook Running Lead Manager(s)SaleMethodDeal Size($millions)Bloomberg Market SectorCalifornia-Various Purpose CA 3/11/13 JP Morgan/Goldman Negotiated 2,472 General ObligationNew Jersey Econ Dev Auth-Sch Facs NJ 1/21/13 Bank of America Merrill Negotiated 2,253 AppropriationsUniversity of California Regents CA 2/25/13 JP Morgan/Bank of America Merrill Negotiated 1,594 Higher EducationNew Jersey Turnpike NJ 3/18/13 JP Morgan Negotiated 1,400 Toll Highways/Bridges/TunnelsJobsOhio Beverage System Liquor OH 1/28/13 JP Morgan/Citigroup Negotiated 1,106 Miscellaneous TaxNew York City Transitional Finance NY 3/18/13 Wells Fargo/Citigroup Negotiated 1,001 Income TaxNew York City NY 2/25/13 Morgan Stanley/JP Morgan Competitive 973 General ObligationNew York State Urban Dev NY 3/11/13 Wells Fargo/JP Morgan Negotiated 843 Income TaxLos Angeles CA Unif Sch Dist-TRANS CA 2/18/13 JP Morgan Negotiated 780 School DistrictArizona Transportation Board AZ 1/14/13 JP Morgan Negotiated 715 Nontoll Highway/Bridge/TunnelSource: BloombergLargest Debt Issuances Q1 2013Sales Rose Steadily Throughout First Quarter, With 40 Percent for Refunding0510152025303540January February MarchQ1 2012 Q1 2013Source: Bloomberg<211%2-2.99914%3-3.99917%4-4.99918%5-5.99939%>=61%Source: BloombergDuring the first quarter of 2013, statesand municipalities sold $85.3 billion inmunicipal securities, including long-termand short-term fixed- and variable-rateissuance, derivatives and notes. This wasup from the $80 billion they sold duringthe first quarter of 2012. Variable-ratesales accounted for $10.1 billion of thetotal in 2013, down from $12.5 billion lastyear. Approximately 40 percent was usedfor refunding. With two insurers now com-peting for business, Assured Guarantyand Build America Mutual, along with acameo appearance by Berkshire Hatha-way, about $2.4 billion carried insurance.— Alberto FuertesThe pie chart shows coupon dispersionin the municipal market during the firstquarter of 2013. Coupons of between 5percent and 5.99 percent made up 39percent of all fixed-rate coupons, with4s right behind at 18 percent. During thefirst quarter of 2012, 5s also accountedfor 39 percent of all coupons. High-yieldcoupons, more than 6 percent, made up2 percent of the market during the firstquarter of 2012, only 1 percent this year.— Alberto FuertesMonthly Issuance, in BillionsCoupon Dispersion, Fixed-Rate Coupons 1 2 3 4 5 6 7 8 04.24.13 Bloomberg Brief | Municipal Market 6
  7. 7. InvestorsTicker Name Management Company1stQuarterof 2012AssetsExpenseratioMGMTFeeNHMRX US Nuveen High Yield Municipal Bond Fund Nuveen Fund Advisors/USA 2.14 9304.04 0.65 0.52GHYIX US Goldman Sachs High Yield Municipal Fund Goldman Sachs Asset Management LP 2.09 3890.97 0.57 0.53MMHIX US MainStay High Yield Municipal Bond Fund New York Life Investment Management LLC 1.83 1092.40 0.6 0HYMIX US Lord Abbett Municipal Income Trust - Lord Abbett High Yield Municipal Bond Fund Lord Abbett & Co LLC 1.59 2267.78 0.6 0.48PHIZX US Prudential Muni High Income Fund Prudential Investments LLC 1.47 779.18 0.62 0.5WYMHX US Ivy Municipal High Income Fund Ivy Investment Management Co 1.43 1456.22 0.7 0.52ACTDX US Invesco High Yield Municipal Fund Invesco Advisers Inc/USA 1.43 7243.04 0.6 0.51DVHIX US Delaware National High-Yield Municipal Bond Fund Delaware Management Co 1.25 544.29 0.6 0.55EIHYX Eaton Vance High Yield Municipal Income Fund Boston Management & Research 1.12 761.57 0.61 0.54PTFYX Putnam Tax-Free High Yield Fund Putnam Investment Management LLC 1.07 1164.29 0.58 0.49Source: BloombergTicker Name Management Company1stQuarterof 2012AssetsExpenseratioMGMTFeeNCHRX Nuveen California High Yield Municipal Bond Fund Nuveen Fund Advisors/USA 1.40 362.69 0.68 0.58RMUYX Oppenheimer Rochester Fund Municipals OFI Global Asset Management Inc 1.43 8415.86 0.73 0.46ONYYX Oppenheimer Rochester AMT-Free New York Municipal Fund OFI Global Asset Management Inc 1.20 1471.40 0.53 0.46BCHIX American Century California High-Yield Municipal Fund American Century Investment Management Inc 1.01 771.82 0.3 0.3NCSPX Nuveen California Municipal Bond Fund Nuveen Fund Advisors/USA 1.14 718.73 0.62 0.52OCAYX Oppenheimer California Municipal Fund OppenheimerFunds Inc 0.99 1760.80 0.65 0.45SGCAX Wells Fargo Advantage California Tax-Free Fund Wells Fargo Funds Management LLC 0.88 823.88 0.55 0.34PCIZX Prudential California Municipal Income Fund Prudential Investments LLC 0.98 252.52 0.67 0.5BCLIX American Century California Long-Term Tax-Free Fund American Century Investment Management Inc 0.81 430.97 0.27 0.27NMVAX Nuveen Virginia Municipal Bond Fund Nuveen Fund Advisors/USA 0.73 457.16 0.61 0.51Source: BloombergMutual Fund Performance — National Open End FundsMutual Fund Performance — Single State Open End FundsInvestors Who Want Yield Have to Speculate on Future of Industry0.0% 0.2% 0.3% 0.5% 0.6% 0.8% 0.9% 1.1% 1.2%Water and SewerLocal General ObligationEducationState General ObligationOVERALL INDEXElectricSpecial TaxTransportationLeasingHospitalHousingResource RecoveryIDR/PCRTobaccoSectorRiskiest Muni Bonds Extend Rally Into 2013ReturnSource: Barclays Plc.The lowest-rated municipal bondscontinued to provide the biggest returnsin the first quarter of 2013, according todata from Barclays Plc. The company’sbest-performing tobacco bond index hasan average rating quality of A2 to A3 fromMoody’s, the second-lowest among theindexes. The second-best performing sec-tor -- industrial development and pollutioncontrol revenue bonds -- has the lowestrating of all indexes at A3 to Baa1. The ex-tra yield demanded on BBB debt relativeto AAAs declined to 0.96 percentage pointon March 19, the narrowest since 2008,Bloomberg data show.— Brian ChappattaRiskiest Muni Bonds Extend Rally into 2013 1 2 3 4 5 6 7 8 04.24.13 Bloomberg Brief | Municipal Market 7
  8. 8. Assured GuarantyFile: 4519_AG Illin4Deal_BloombMYSAK.inddInsertion: 4.XX.2013Due: 4.17.13Bloomberg/MysackPROVEN STRENGTH, PROVEN VALUE.These selected transactions are among the more than 300 new issues and secondary market positions we haveguaranteed so far this year, representing $1.8 billion of insured par. With over a quarter century of experienceand $12 billion in claims-paying resources, Assured Guaranty is the proven leader in municipal bond insurance.Assured Guaranty Municipal Corp. and Assured Guaranty Corp. (and affiliates), New York, New York. More at$450,000,000General Obligation BondsSeries A of April 2013STATE OF ILLINOIS$180,000,000sold with insurance fromBofA Merrill LynchPrager & Co., LLC CastleOak Securities, L.P.$1,400,000,000Turnpike Revenue BondsSeries 2013ANEW JERSEY TURNPIKE AUTHORITY$55,030,000sold with insurance fromJ.P. MorganBofA Merrill Lynch Goldman, Sachs & Co.Barclays Morgan Stanley Piper JaffrayRamirez & Co., Inc. Wells Fargo Securities$248,325,000Tax-Exempt Senior Lien Revenue Refunding BondsSeries 2013AALAMEDA CORRIDORTRANSPORTATION AUTHORITY$92,685,000sold with insurance fromStone & Youngberg, BofA Merrill Lyncha Division of Stifel Nicolaus$50,730,000Department of Human ServicesLease Revenue Bonds(Greystone Park Psychiatric Hospital Project)Series 2013ANEW JERSEY HEALTH CAREFACILITIES FINANCING AUTHORITY$41,345,000sold with insurance fromRBC Capital Markets 1 2 3 4 5 6 7 8 04.24.13 Bloomberg Brief | Municipal Market 8