Municipal Finance Healthcare Group Weekly Update

Transcription

1 Municipal Finance Healthcare Group Weekly Update February 6, 2018 Market Update A plethora of strong economic data reinforced the market s expectations of multiple Federal Reserve rate hikes this year and next, pressuring prices in both debt and equity markets last week. Rates on US Treasuries rose considerably and municipal rates followed suit despite a light new issue calendar and the receipt of February 1 coupons. Municipal issuance is expected to continue to be very light again this week. Last week s economic calendar was very full with a large number of top tier data points for the market to analyze, and was capped by the monthly employment report at the end of the week. On Monday, the Bureau of Economic Analysis reported December personal income and spending which both exceeded market expectations. Tuesday saw the release of the November S&P CoreLogic Case-Shiller Home Price Index and The Conference Board s January Consumer Confidence Index, both of which came in higher than the Bloomberg Survey estimates. Thursday s release of the Institute for Supply Management s January manufacturing index also printed above forecast, particularly in the priced paid component. Similarly, the University of Michigan s January Consumer Sentiment Index and December Factory Orders also beat the market forecasts. The two highest profile releases of the week were Wednesday s FOMC rate decision and the January employment report. As expected, the Federal Reserve left rates unchanged on Wednesday. The next FOMC decision is scheduled for March 21, Finally, the Bureau of Labor Statistics reported that non-farm payrolls increased 200,000 in January after an upwardly revised 160,000 in December. The Bloomberg Survey estimate called for a gain of 180,000 in the month. Average hourly earnings increased 2.9% y/y from an upwardly revised 2.7% y/y in December. Local government (ex-education) payrolls increased an estimated 9,800 m/m in January while state government (ex-education) payrolls declined 9,900 m/m. Municipal primary issuance fell last week as the first month of 2018 came to a close. Only one week in January printed new issue volume close to historical averages, with the rest far lower. Preliminary estimates put issuance for the month at approximately $17 billion. This is well below the $24 billion ten-year average for the month and significantly below the $36 billion that came to market in January February is starting out light as well with this week s issuance projected to be only about $4.2 billion. Municipal bond funds that report their flows on a weekly basis posted their fourth consecutive week of net inflows last week, but the flows were lower than in recent weeks. These funds reported net inflows of $236 million in the week ended January 31, 2018, compared to the $781 million in net inflows reported in the prior week according to the Lipper US Fund Flows service. Over the last four weeks, the weekly reporting municipal bond funds have realized $3.26 billion in net inflows. The distribution of the municipal fund reflected inflows into long term and intermediate municipal bond funds, but outflows in the high yield and short municipal bond fund sectors. Tax-exempt money market funds (TEMMs) reported their first week of outflows in nine weeks last week. According to the Lipper US Fund Flows service, TEMMs experienced net outflows of $412 million in the week ended January 31, 2018 compared to the $760 million in net inflows reported in the prior week. Over the last nine weeks, TEMMs have realized a cumulative $7.9 billion in net inflows. Fixed income markets sold off sharply last week as concerns over expected Fed rate hikes this year and next firmly took hold. A selloff in the equity markets reinforced the bearish sentiment. Municipal rates generally followed Treasury rates higher despite a light new issue calendar and expectations of a strong February 1 reinvestment. Continued customer selling also added to the pressure on municipals. By the close of the week, US Treasury yields were 12 basis points higher in the five year range and 18 basis points higher in both the ten and in the thirty year ranges. Municipals followed the lead of Treasuries but somewhat underperformed, particularly in the shorter maturity ranges, with the Municipal Market Data AAA yield closing the week three basis points higher in the two year range, 20 basis points higher in the five range, 23 basis points higher in ten years ranges and 19 basis points higher in the thirty year range. The February coupon payment didn t impact the short-term municipal market until the very end of last week. But the larger than usual February coupon helped drive down rates on short term tax-exempt paper. Daily rates ended the week eleven basis points lower, with the general market high grade average closing the week at 0.87% from the 0.98% level reached at the previous week s close. Weekly rates moved lower for the fifth consecutive week, with the SIFMA index closing at 1.08% on January 24, 2018 compared to the 1.16% rate on January 24, This week s economic calendar is extremely light. Key releases include the Institute of Supply Management s Non-Manufacturing index for January and the Mortgage Bankers Association s report on 4Q2017 mortgage delinquencies and foreclosures, both of which will be reported on Monday. Later in the week the US Bureau of Labor Statistics will release the Job Opening and Turnover report for December and the US Census Bureau will report on December wholesale inventories. Economic Indicators Source: Bloomberg Release Date Event Period Consensus Prior Monday ISM Non-Manf. Composite January Monday Markit US Services PMI January (Final) Monday Markit US Composite PMI January (Final) Tuesday Trade Balance December -$52.1b -$50.5b Wednesday MBA Mortgage Applications Period End February % Wednesday Consumer Credit December $20.000b $27.951b Thursday Initial Jobless Claims Period End February 3 232k 230k Thursday Continuing Claims Period End January k 1953k Thursday Bloomberg Consumer Comfort Period End February Friday Wholesale Inventories MoM December (Final) 0.20% 0.20%

2 HEALTHCARE GROUP WEEKLY UPDATE Healthcare Forward Calendar (A) : Dartmouth-Hitchcock Health Dartmouth-Hitchcock Obligated Group (NH) New Hampshire Health and Education Facilities Authority Dartmouth-Hitchcock Obligated Group (NH) Elsa Medical Facility Finance Corporation Elsa Medical Facility Finance Corporation (TX) Elsa Medical Facility Finance Corporation Elsa Medical Facility Finance Corporation (TX) Vermont Economic Development Authority Health Care and Rehabilitation Services, Inc. (VT) Vermont Economic Development Authority Health Care and Rehabilitation Services, Inc. (VT) Source: Bloomberg (A) Preliminary; subject to change - issues expected to price this week $301,995,000 Fixed Rate Term Bonds Fixed Rate $86,650,000 Serial Bonds Fixed Rate $62,595,000 Serial and Term Bonds Fixed Rate $11,205,000 Serial and Term Bonds $8,560,000 Fixed Rate Serial and Term Bonds Fixed Rate $200,000 Term Bond Capital Market Indications Swap and Bond Rates (B) Market Conditions as of close February 02, 2018 Average Life (Yrs) UST ICE LIBOR MMD AAA GO Receivor Payor* Fixed Payor* % 2.12% 1.35% 1.31% % 1.52% % 2.37% 1.55% 1.51% % 1.69% % 2.52% 1.67% 1.65% % 1.79% % 2.62% 1.78% 1.75% % 1.86% % 2.69% 1.93% 1.84% % 1.90% 0.03% % 2.74% 2.04% 1.84% % 1.93% 0.11% % 2.78% 2.17% 1.98% % 1.97% 0.20% % 2.82% 2.30% 2.03% % 1.99% 0.31% % 2.85% 2.39% 2.07% % 2.01% 0.38% % 2.88% 2.46% 2.12% % 2.03% 0.43% % 2.92% 2.58% 2.19% % 2.05% 0.53% % 2.95% 2.74% 2.26% % 2.08% 0.66% % 2.97% 2.90% 2.32% % 2.09% 0.81% % 2.95% 3.00% 2.38% % 2.08% 0.92% (B) Will vary depending on transaction details. Source: Bloomberg, TM3 *Fixed Payor rates do not include variable rate costs such as remarketing and liquidity. Rates also do not take into account any credit charges. Interest Rate Update MMD Benefit to Traditional Variable Rate (SIFMA) SIFMA Fixed 67% ICE LIBOR Interest Rate Week End Week End Market Indicators Week End Week End Marker 26-Jan Feb Jan Feb-18 SIFMA 1.160% 1.080% DJIA 26,617 25,521 SIFMA-1M ICE LIBOR Ratio % % 30 Day CP 1.50% 1.49% 1 Month ICE LIBOR 1.568% 1.580% Revenue Bond Index 4.08% 4.21% 3 Month ICE LIBOR 1.767% 1.789% Aaa Muni Yields (20 Year) 2.71% 2.90% 3 Month T-Bill 1.391% 1.454% 30-Day Visible Supply (bn) Fed Funds Target 1.500% 1.500% Source: Bloomberg, TM3 1 Year Treasury 1.780% 1.870% Ratings - Royal Bank of Canada 2 Year Treasury 2.109% 2.140% Moody's S&P Fitch 5 Year Treasury 2.473% 2.596% Long-Term A1 AA- AA 10 Year Treasury 2.661% 2.842% Short-Term P-1 A-1+ F Year Treasury 2.912% 3.087% Outlook Negative Negative Stable Source: Bloomberg SIFMA Fixed Source: Moody's (05/15/17), S&P (06/20/17), Fitch (10/27/17) 67% ICE LIBOR Spread to MMD RBC Capital Markets Healthcare Group - Team Members Jerry Berg, Managing Director David Fields, Managing Director Jeff Appel, Director Sonal Bose, Director Office: (312) Office: (215) Office: (617) Office: (212) Cell: (630) Cell: (518) Cell: (617) Cell: (917) jerry.berg@rbccm.com david.fields@rbccm.com jeff.appel@rbccm.com sonal.bose@rbccm.com Evie Wang, Director Rob Whitlock, Director Christopher Good, Vice President Blake Pinell, Associate Office: (212) Office: (215) Office: (212) Office: (212) Cell: (646) Cell: (215) Cell: (347) Cell: (347) evie.wang@rbccm.com rob.whitlock@rbccm.com christopher.good@rbccm.com blake.pinell@rbccm.com James Yang, Associate Harry Tsiagbe, Analyst Office: (212) Office: (212) Cell: (917) Cell: (551) james.yang@rbccm.com harry.tsiagbe@rbccm.com

3 HEALTHCARE GROUP WEEKLY UPDATE Source: Federal Reserve System, US Bureau of Economic Analysis, S&P CoreLogic; US Census Bureau, The Conference Board; University of Michigan; Institute for Supply Management, US Bureau of Labor Statistics, The Bond Buyer, Securities Data, Lipper US Fund Flows, Bloomberg. Preliminary, subject to change. This announcement is not an offer, solicitation, commitment or recommendation to buy or sell the bonds and does not purport to be a complete statement of all material facts relating to the bonds. The offering is made only by means of the Official Statement, copies of which may be obtained from RBC Capital Markets. This communication is not, and under no circumstances should be construed as, a solicitation to act as securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. Products and services are offered through RBC Capital Markets or RBC Wealth Management, as applicable. RBC Capital Markets may buy from or sell to customers on a principal basis in the securities or related derivatives that are the subject of this communication. RBC Capital Markets has or may have proprietary positions in the securities or in related derivatives that are the subject of this communication. RBC Capital Markets may have been manager or co-manager of a public offering of securities of the issuer within the past twelve months. Additional information is available upon request. All information contained in this communication constitutes RBC Capital Markets judgment as of the date of this communication, and is subject to change without notice and is provided in good faith but without legal responsibility. The information contained in this communication has been compiled by RBC Capital Markets from sources believed to be reliable, but no representation or warranty, express or implied, is made by RBC Capital Markets,its affiliates or any other person as to its accuracy, completeness or correctness. The material contained herein is not a product of any research departmentofrbccapital Markets or any of its affiliates. Nothing herein constitutes a recommendation of any security or regarding any issuer; nor is it intended to provide information sufficient to make an investment decision. RBC Capital Markets is not acting as a fiduciary or as a municipal, financial, commodity or investment adviser to the Obligated Person or any other person or entity. The information provided is not intended to be and should not be construed as advice within the meaning of Section 15B of the Securities Exchange Act of Nothing in this communication constitutes legal, accounting or tax advice or individually tailored investment advice. This material has been prepared without regard to the individual financial circumstances and objectives of persons who receive it and such investments or services may not be suitable for all investors. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Potential investors are advised to consult with their own legal, accounting, tax, financial and other advisors, as applicable, to the extent appropriate. This document may not be reproduced, disclosed, distributed or summarized, whole or in part, to any third party without the prior consent of RBC Capital Markets. To the fullest extent permitted by law neither RBC Capital Markets, nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this communication or the information contained herein. This advertisement is for informational purposes only. RBC Capital Markets is the global brand name for the capital markets business of Royal Bank of Canada and its affiliates, including RBC Capital Markets, LLC (member FINRA, NYSE and SIPC). / Trademark(s) of Royal Bank of Canada. Used under license. Copyright All rights reserved.

4 Week Ended 02/02/2018 Par Amount $475,000,000 $350,000,000 Issuer Orlando Health Obligated Group Providence St. Joseph Health Borrower Orlando Health Obligated Group (FL) Providence St. Joseph Health (WA) Issue Name Taxable Hospital Revenue Bonds, Series 2018 Taxable Bonds, Series 2018A Issue Rating A2/A/NR Aa3/AA-/AA- Underlying Rating A2/A/NR Aa3/AA-/AA- Pricing Date 01/29/18 01/30/18 Dated Date 02/06/ /06/18 Final Maturity 10/01/ /01/2048 Bonds Due 10/01/ , 2028, /01/2048 Call Provisions MWC (UST+20bps) MWC (UST+20bps) DSRF No No CUSIP (last maty) AF AE8 Par UST Spread Par UST Spread Maturity Amount 01/29/18 Coupon Yield (Bps) Amount 01/30/18 Coupon Yield (Bps) ,000, % 2.278% 2.278% ,000, % 2.724% 2.724% ,000, % 2.981% 2.981% ,000, % 3.205% 3.205% ,000, % 3.777% 3.777% ,000, % 4.089% 4.089% ,000, % 3.930% 3.930% 95

5 Par Amount $141,690,000 Issuer Washington Health Care Facilities Authority Borrower Providence St. Joseph Health Issue Name Refunding Revenue Bonds, Series 2016B Issue Rating Aa3/AA-/AA- Underlying Rating Aa3/AA-/AA- Pricing Date 01/30/18 Dated Date 02/06/18 Final Maturity 10/01/2033 Bonds Due 10/01/ Call Provisions 100 DSRF No CUSIP (last maty) 93978HUY9 Par MMD Spread Maturity Amount 01/29/18 Coupon Yield (Bps) ,910, % 5.000% 2.520% ,305, % 5.000% 2.710% ,780, % 5.000% 2.800% ,225, % 5.000% 2.910% ,685, % 5.000% 2.980% ,190, % 5.000% 3.040% ,680, % 5.000% 3.090% ,185, % 5.000% 3.120% ,730, % 5.000% 3.170% *Spread to October "AAA" MMD

6 New Issue Healthcare Pricings Prior Four Weeks MUNICIPAL FINANCE

7 Week Ended 01/26/2018 Par Amount $72,820,000 $27,915,000 Issuer Michigan State Hospital Finance Authority Hospital Authority of Columbus, Georgia Borrower Ascension Health Credit Group (MO) Hospital Authority of Columbus, Georgia and Columbus, Georgia (GA) Issue Name Variable Rate Revenue Bonds, Series 1999B-3 Revenue Anticipation Certificates, Series 2018B Issue Rating Aa2/AA+/AA+ A2/AA+/NR Underlying Rating Aa2/AA+/AA+ A2/AA+/NR Pricing Date 01/25/18 01/23/18 Dated Date 11/01/ /21/18 Final Maturity 11/15/ /01/2047 Bonds Due 11/15/ , /01/2024-,, 2047 Call Provisions DSRF No Yes CUSIP (last maty) 59465HUY FG2 Par MMD Spread Par MMD Spread Maturity Amount 01/24/18 Coupon Yield (Bps) Amount 01/22/18 Coupon Yield (Bps) , % 3.000% 1.970% , % 5.000% 2.070% ,725, % 4.000% 2.550% , % 5.000% 2.200% ,600, % 4.000% 2.690% , % 5.000% 2.310% , % 4.000% 2.480% , % 4.000% 2.600% , % 4.000% 2.650% ,600, % 4.000% 3.160% 73 1,015, % 4.000% 2.710% ,500, % 4.000% 3.250% 78 1,050, % 3.000% 3.000% ,395, % 4.000% 3.300% 78 1,080, % 3.000% 3.070% ,115, % 3.000% 3.170% ,150, % 3.000% 3.190% 65 1,185, % 3.125% 3.220% ,220, % 3.125% 3.250% 65 1,260, % 3.250% 3.280% 65 5,475, % 3.250% 3.360% ,955, % 3.375% 3.430% *Spread to November "AAA" MMD *Spread to July "AAA" MMD

8 Par Amount $3,395,000 Issuer Hospital Authority of Columbus, Georgia Borrower Hospital Authority of Columbus, Georgia and Columbus, Georgia (GA) Issue Name Taxable Revenue Anticipation Certificates, Series 2018A Issue Rating A2/AA+/NR Underlying Rating A2/AA+/NR Pricing Date 01/23/18 Dated Date 02/21/18 Final Maturity 07/01/2024 Bonds Due 07/01/ Call Provisions Non-Callable DSRF Yes CUSIP (last maty) FM9 Par UST Spread Maturity Amount 01/23/18 Coupon Yield (Bps) , % 2.450% 2.350% , % 2.450% 2.450% , % 2.700% 2.600% , % 2.600% 2.700% , % 2.900% 2.900% *Spread to July "AAA" MMD

9 Week Ended 01/19/2018 Par Amount $2,975,000 $640,000 Issuer Washington State Housing Finance Commission Washington State Housing Finance Commission Borrower Wesley Homes Des Moines, LLC (WA) Wesley Homes Des Moines, LLC (WA) Issue Name Adjustable Rate Bonds, Series 2016B-5 Fixed Rate Bonds, Series 2016C-1 Issue Rating NR/NR/NR NR/NR/NR Underlying Rating NR/NR/NR NR/NR/NR Pricing Date 01/16/18 01/16/18 Dated Date 01/19/ /19/18 Final Maturity 07/01/ 07/01/2021 Bonds Due Mandatory Tender: 07/01/ /01/2021 Call Provisions 104; 103; 102; 101; 100 Upon 30 days' 100 DSRF Yes Yes CUSIP (last maty) VY VZ6 Par MMD Spread Par MMD Spread Maturity Amount 01/12/18 Coupon Yield (Bps) Amount 01/12/18 Coupon Yield (Bps) , % 5.690% 5.690% ,975, % 5.100% 5.100% *Spread to July "AAA" MMD *Spread to July "AAA" MMD

10 Week Ended 01/12/2018 Par Amount $500,000,000 $223,550,000 Issuer Stanford Health Care Illinois Finance Authority Borrower Stanford Health Care Ann & Robert H. Lurie Children's Hospital of Chicago (IL) Issue Name Taxable Bonds, Series 2018 Taxable Revenue Refunding Bonds, Series 2018 Issue Rating Aa3/AA-/AA NR/AA-/AA Underlying Rating Aa3/AA-/AA NR/AA-/AA Pricing Date 01/10/18 01/10/18 Dated Date 01/17/ /18/18 Final Maturity 11/15/ /15/2047 Bonds Due 11/15/ /15/ , 2047 Call Provisions or 100 MWC (UST+15bps) Make-Whole Call (UST+20bps) DSRF No No CUSIP (last maty) 85434VAA ED47 Par UST Spread Par UST Spread Maturity Amount 01/10/18 Coupon Yield (Bps) Amount 01/10/18 Coupon Yield (Bps) ,840, % 3.498% 3.498% ,875, % 3.548% 3.548% ,260, % 3.598% 3.598% ,670, % 3.648% 3.648% ,090, % 3.698% 3.698% ,540, % 3.748% 3.748% ,275, % 3.944% 3.944% ,000, % 3.795% 3.795% 90

11 Par Amount $133,755,000 $89,400,000 Issuer Public Finance Authority Garfield and Mesa Counties, Colorado Borrower Prime Healthcare Foundation (WI) Grand River Hospital District (CO) Issue Name Revenue Bonds, Series 2018A General Obligation Bonds, Series 2018 Issue Rating NR/NR/BBB- NR/AA/NR Underlying Rating NR/NR/BBB- NR/BBB+/NR Pricing Date 01/11/18 01/11/18 Dated Date 01/24/18 01/22/18 Final Maturity 12/01/ 12/01/2037 Bonds Due 12/01/2027, 2037, 12/01/ , 2037 Call Provisions DSRF Yes No CUSIP (last maty) 74442PFU EQ3 Par MMD Spread Par MMD Spread Maturity Amount 01/10/18 Coupon Yield (Bps) Amount 01/10/18 Coupon Yield (Bps) ,820, % 5.000% 1.700% ,740, % 5.000% 1.900% ,830, % 5.000% 2.020% ,225, % 5.000% 2.120% ,385, % 5.000% 2.230% ,555, % 5.000% 2.340% ,735, % 5.000% 2.450% ,920, % 5.000% 2.610% ,115, % 5.000% 2.740% ,200, % 5.000% 5.000% 288 4,320, % 5.000% 2.820% ,540, % 5.250% 2.850% ,775, % 5.250% 2.920% ,025, % 5.250% 2.950% ,290, % 5.250% 2.980% ,570, % 5.250% 3.020% ,860, % 5.250% 3.080% ,170, % 5.250% 3.090% ,495, % 5.250% 3.110% ,565, % 5.200% 5.300% ,030, % 5.250% 3.160% 58 55,990, % 5.350% 5.400% *Spread to December "AAA" MMD *Spread to December "AAA" MMD

12 Par Amount $56,600,000 Issuer Kanabec County, Minnesota Borrower Firstlight Health System Issue Name Healthcare Revenue Bonds Anticipation Notes, Series 2018 Issue Rating NR/NR/NR Underlying Rating NR/NR/NR Pricing Date 01/10/18 Dated Date 01/18/18 Final Maturity 12/01/2019 Bonds Due 12/01/2019 Call Provisions 100 DSRF No CUSIP (last maty) AA5 Par MMD Spread Maturity Amount 01/09/18 Coupon Yield (Bps) ,600, % 2.750% 2.750% *Spread to December "AAA" MMD

13 Week Ended 01/05/2018