Robert W. Baird & Co. Robert W. Baird & Co. CURRENT - - PowerPoint PPT Presentation
Robert W. Baird & Co. Robert W. Baird & Co. CURRENT MUNICIPAL MARKET ENVIRONMENT AND CURRENT MUNICIPAL MARKET ENVIRONMENT AND PROPOSED REFUNDING OF PROPOSED REFUNDING OF THE SERIES 2012 BONDS THE SERIES 2012 BONDS Presented to:
Presented to: November 2017 Yoon-Sook Moon,
303 303.2 .270.6 .6338 dire direct ymoon@rwbaird.com
Brian Brian K Kelso, lso, Managing Director
303 303.2 .270.6 .6337 dire direct bkelso@rwbaird.com
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Section 1: Curren Current Mu Municipa cipal Market Enviro l Market Environmen ent Section 2: Bon Bond Refu Refundin ing Opportu g Opportunity ity Section 3: Outst Outstandin ing Gen g General Obligatio ral Obligation Debt Debt Service Service
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Index is an industry benchmark reflective of “AAA” rated general
trended down during 2017.
1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00%
Aaa GO 15 YR Average
15-Year Aaa MMD History Since 2007
As of 11/01/17
2.640% Average 3.415% Minimum 1.800% Maximum 5.740% 2.40% 2.60% 2.80% 3.00% 3.20%
15 Year MMD (January 1, 2017 to Current)
Source: Thomson Municipal Market Monitor (TM3) as of November 1, 2017
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Source: Thomson Municipal Market Monitor (TM3) as of November 2, 2017
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Fund flow data serves as a proxy for investor appetite for municipal bonds.
10 Year Historical Net Municipal Bond Flow of Funds One Year Snapshot
*Source: Investment Company Institute as of November 3, 2017
Date te IC ICI F I Fund F Flow October 25, 2017 $663,000,000 October 18, 2017 $714,000,000 October 11, 2017 $355,000,000 201 2015 A Avg. 201 2016 A Avg. 201 2017 Y YTD Avg.* $292,505,385 $522,923,077 $544,232,558
$663 MM (Oct, 2017) $663 MM (Oct, 2017)
0.0 5.0 10.0 15.0 $ B Bill llio ions
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Refundings vs. New Money
While refundings were the primary form of issuance in 2015 and 2016; refundings are down 71% year over year. Conversely, 49% of all issues year to date are new money.
Source: The Bond Buyer as of October 31, 2017
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Bloomberg Monthly Economic Survey polls financial service economists/analysts on their projection for key economic data. Interest Rates: US Treasury bonds/notes have risen from their August low with the 2-, 10- and 30- year notes projected to end the year at 1.60%, 2.48% and 3.03%. Compared to year- end projections just 3 months ago (July 2017), the 2-year is 10 basis points (bps) lower and both the 10-year 30-year are 12 bps lower. Baird’s economists believe the 10-year Treasury note “has moved in sync with copper prices” (which are trending higher). In addition, they believe the 10-year note movement will be “dependent on” German Bund yields. With the continuation of ECB’s QE programs, German yields could struggle to move higher. However, surprises out of the ECB or an abrupt shift from quantitative easing to quantitative tightening could put upward pressure on German yields, thus supporting the message of higher Treasury yields in the future. The Federal Open Market Committee (FOMC): The Fed signaled one more interest rate hike in 2017 and potentially three in 2018. The FOMC voted to begin tapering its balance sheet in October. The FOMC will first allow $10 billion each month to roll off the $4.5 trillion balance sheet by not reinvesting as securities mature. One year from now, tapering will increase by $10 billion a month to a maximum of $50 billion per month.
Source: Bloomberg as of October 13, 2017; Baird Market and Investment Strategy Technical Review & Outlook October 12, 2017; Business Insider, “Fed to unwind financial-crisis emergency measures and begin shrinking its $4.5 trillion balance sheet in October,” September 20, 2017
(1) The interest rate at which a depository institution lends funds maintained at the Federal Reserve
to another depository institution overnight. The higher the federal funds rate, the more expensive it is to borrow money. The Federal Funds Rate can be viewed as the base rate that determines the level of all other interest rates in the U.S. Economy.
(2) London Interbank Offered Rate. A benchmark rate that some of the world's leading banks charge
each other for short-term loans.
Me Median R Rate Summary 4Q 1Q 2Q 3Q 4Q 1Q 2017 2018 2018 2018 2018 2019 Fed Funds Lower
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1.25% 1.25% 1.50% 1.75% 1.75% 2.00% Fed Funds Higher
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1.50% 1.50% 1.75% 2.00% 2.00% 2.25% 2-Year Note 1.60% 1.79% 1.95% 2.15% 2.30% 2.46% 10-Year Note 2.48% 2.58% 2.70% 2.84% 2.95% 3.05% 30-Year Note 3.03% 3.15% 3.27% 3.31% 3.40% 3.50% 3-Month Libor
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1.56% 1.70% 1.88% 2.10% 2.22% 2.40% Median an E Economic I Indicator S Summar ary Q3 Q4 Q1 Q2 Avg Avg Avg 2017 2017 2018 2018 2017 2018 2019 Unemployment 4.4% 4.3% 4.2% 4.1% 4.4% 4.2% 4.1% Consumer Spending 2.1% 2.6% 2.4% 2.5% 2.7% 2.4% 2.2% CPI (YOY) 2.0% 1.9% 1.6% 2.2% 2.1% 2.0% 2.2% PCE (YOY) 1.5% 1.6% 1.5% 1.8% 1.7% 1.8% 2.0% Core PCE (YOY) 1.4% 1.5% 1.5% 1.7% 1.5% 1.7% 2.0% GDP 2.4% 2.6% 2.2% 2.4% 2.2% 2.4% 2.1% Budget
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refunding of select callable maturities of the Series 2012 Bonds.
interest rates and a closing on January 17, 2018, present value savings are $3,387,553 or approximately 5.66% of the refunded par.
10/30/201 10/30/2017 Par Amount $56,345,000 Premium 11,910,196 Accrued Interest Fund 257,289 2018 $2,637,211 $2,552,478 $84,733 $80,067 Proceeds $68,512,484 2019 $2,894,500 $2,801,500 $93,000 $88,673 2020 $2,894,500 $2,801,500 $93,000 $86,164 Escrow Deposit 68,133,127 2021 $2,894,500 $2,801,500 $93,000 $83,727 2022 $2,894,500 $2,801,500 $93,000 $81,358 Series Refunded Series 2012 2023 $4,164,500 $3,731,500 $433,000 $366,006 Maturities Refunded 2023-2028 & 2030-2032 2024 $3,846,000 $3,409,300 $436,700 $358,530 Average Coupon of Refunded Bonds 4.85% 2025 $8,415,250 $7,983,500 $431,750 $344,299 Call Provision 12/15/2022 @ Par 2026 $8,408,500 $7,976,250 $432,250 $334,837 Par Amount of Bonds Refunded $59,900,000 2027 $10,913,000 $10,481,250 $431,750 $324,877 2028 $10,914,500 $10,482,250 $432,250 $316,054 Potential Net PV Savings $3,387,553 2029 $1,411,750 $1,352,500 $59,250 $42,400 Potential Net PV Savings % 5.66% 2030 $8,431,750 $7,997,500 $434,250 $300,090 Potential Negative Arbitrage $1,484,640 2031 $11,410,750 $10,975,250 $435,500 $292,348 2032 $11,408,250 $10,972,500 $435,750 $284,147 All-In TIC 2.89% $93,539,461 $89,120,278 $4,419,183 $3,387,553 Arbitrage Yield 2.47%
PV savings discounted at the All-In TIC.
Assumed Delivery Date: January 17, 2018 Assumed Rates and Yields As Of: October 30, 2017 Summary o
Hypothetical Potent ntial R Refund unding R Resul sults Hyp ypothe hetical P Potent ntial A Annua nnual S Saving ngs Year Prior Net Debt Service Refunding Debt Service Potential Savings Potential PV Savings
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$- $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 $50,000,000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
JEFFERSON COUNTY SCHOOL DISTRICT
Outstanding Debt Service
Series 2010 Series 2012 Refunding Series 2012 New Money Series 2015