Municipal Government Audit Times Likely Affected by GASB Pension Rules A longstanding complaint among municipal bond analysts and […]
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Muninet Guide provides commentary and analysis relating to municipal bonds and their fundamental credit issues. From an investor perspective, we provide you with daily AAA yield levels on tax-exempt municipal bonds courtesy of Standard & Poor’s Securities Evaluations, Inc….
Daily Municipal Bonds Yields January 18, 2019
- Tax-Exempt AAA Non-callable S&P Yield Curve Recap (based on representative indices) at the close of day on January 18, 2019 compared to the previous market day.
- Rates were unchanged on the key yield curve benchmark maturities through the ten year mark.
- The 15-year, 20-year and 25-year maturities rose by one basis point.
- The 30-year non-callable municipal bond index yield was up by two basis points hitting 3.37%.
- Non-callable municipal bonds normally carry lower yields on maturity bonds than non-callable ones reflecting the likelihood that investors anticipate principal repayment on the called bonds prior to the stated maturity (optional redemptions usually apply to municipal bonds with maturities of ten years or more).
Source: © 2006 Standard & Poor’s Securities Evaluations, Inc., a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved. Information has been obtained from sources believed to be reliable. However, Standard & Poor’s and MuniNet LLC shall not be liable for any claims or losses of any nature in connection with information contained in this document, including but not limited to, lost profits or punitive or consequential damages, even if it is advised of the possibility of same. All references to municipal bonds or information related thereto is for informational purposes only. It is general in nature and based on matters or authorities that are considered reliable but not guaranteed or verified by MUNINET LLC.
Featured Municipal Bond Issue, Week of January, 14 2019: New York City Water Finance Authority Water and Sewer Revenue Bonds
The New York City (NYC) Water Finance Authority is issuing $450 million in Water and Sewer System Second General Resolution Revenue Bonds the week of January 14, 2019. These NYC water and sewer bonds are being issued as a single series in two parts (Fiscal 2019 Subseries DD- and DD2) to pay costs of capital improvements to the water and sewer system.
The bonds are rated Aa1 by Moody’s and AA+ by both S&P and Fitch.
The Second Resolution Bonds being issued are a special obligation of the Authority, payable only from and secured by a gross pledge of amounts in certain designated funds associated as well as a debt service reserve fund.
The Board has covenanted to establish and collect rates, fees and charges sufficient in each fiscal year to be at least equal to 1.15x of the aggregate debt service on all First Resolution Bonds (excluding Refundable Principal Installments for the payment of which funds are held in trust) payable in the fiscal year and 100% of the operating expenses and required deposits (which includes debt service on the Second Resolution Bonds and other FGR Subordinate Indebtedness, related to the First Resolution) to the extent required to be paid from Revenues for the Fiscal Year.
The Authority’s offering materials claim that the New York Water Authority has a statutory and contractual first claim on revenues, pledged to the bondholders distinct and apart from New York City, making it bankruptcy-remote from the City.
Growth in Public Higher Education Debt Outstanding Outpaces All Other Major Municipal Bond Sectors
Public Higher Education Debt Outstanding Has Grown by Over 80% Since 2007 Leading All Other Major Municipal Bond Credit Sectors
by Richard A. Ciccarone
Municipal Bond Credit Sectors — Ten Year Outstanding Debt Trend
Based on municipal bond credit sector medians, Public Higher Education and Community Colleges registered the biggest increases in long term debt outstanding than any other credit sectors that borrow in the municipal bond market during the period 2007- 2017.
Universities and colleges saw a ten year growth of 85.2%, the most of all major municipal bond sectors tracked by Merritt Research Services LLC, an independent municipal data and research company that tracks financial conditions on over 10,000 municipal bond borrowers.
Long term debt attributed to Community colleges followed close behind with an 80.7% growth rate. The ten year time span used in the comparison included the Great Recession as well as the subsequent recovery years.
Higher education institutions, in general, have incurred higher debt loads for capital improvement programs over the past two decades, triggered by a “keeping up with Jones’” mentality that swept the board rooms of college administrations. The wave of more expansive and luxurious campus facilities at competing colleges and universities was motivated in part on the grounds that the shrinking pool of eligible college age potential students required them to provide state of the art facilities.
Private higher education institutions, many of which started their capital programs earlier than public institutions, ranked fifth in their median debt expansion with a smaller but still robust 39.6% growth rate.
In the case of community colleges, expansion programs heated up as public officials responded to the demand for lower cost institutions available for families seeking a lower cost option to either reduce the cost leading to a four year degree or a path providing more specific job preparation and training..
On the other side of the debt trend scale, wholesale electric agencies, also called joint action agencies, whose primary purpose is to generate or jointly purchase power on behalf of or to resell to mostly local municipal utilities, saw their outstanding debt loads fall by 23.8% over the past ten years, the biggest percent drop among all the major credit sectors tracked Merritt database.
Public power borrowers, which also include retail electric utilities, have seen their debt loads and new capital outlay requirements shrink in line with greater reliance on smaller, less expensive generating plants, more purchased power from surplus suppliers and conservation efforts. Since 2007, retail municipal electric utilities lowered their median long term debt outstanding by 5.4%.
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EMMA – Electronic Municipal Market Access
Official online MRSB repository providing free public access to official disclosures, trade data and other information on the municipal securities market.
Merritt Research Services: Benchmark Central
Merritt Research Services provides benchmark median values for municipal credit analysis across 13 different sectors. Freely available and updated regularly.
Governmental Accounting Standards Board (GASB)
Independent organization that establishes and improves standards of accounting and financial reporting for U.S. state and local government.
The Bond Buyer
Established in 1891, an independent paid-subscription information resource of news, analysis and data serving 40,000+ in the municipal finance community.
A municipal bond new issue official statement (prospectus) service. MuniOS, a division of ImageMaster Inc, makes available preliminary and final documents. Official statements are provided by region and state.
IRS Tax-Exempt Bond Statistics
Includes data on tax-exempt "public purpose" (Governmental) and "private-activity" bonds, with statistical tables and Statistics of Income Bulletins.
What Are Municipal Bonds? - Investor.gov
What Are Municipal Bonds?What are municipal bonds? Municipal bonds (or “munis” for short) are debt securities issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways or sewer systems. By purchasing municipal bonds, you are in effect lending money to the bond issuer in exchange for a promise of regular interest payments, usually semi-annually, and the return of the original investment, or “principal". An excellent primer on municipal bonds, particularly from an investors perspective. Answering these questions: Where Can Investors Find Information About Municipal Bonds? What Are Some Of The Risks Of Investing In Municipal Bonds? In Addition To The Risks, What Other Factors Should You Consider When Investing In Municipal Bonds?