Cook County sells $1.05 billion debt

Cook County will sell $1.05 billion in debt including its largest Build America Bond offering, as municipal issuance rebounds from a two-month low.

Cook County's securities lead more than $8.9 billion in sales set for this week, almost double the prior period, according to data compiled by Bloomberg. The deal comes after stocks fell and Treasuries rose a second straight trading day on lower-than-forecast job growth and as technology shares sank.

The $2.8 trillion municipal bond market "remains at the top end of the risk spectrum," said Justin Hoogendoorn, a managing director in the BMO Capital Markets Fixed-Income Group. "It works for most investors looking to get fixed-income exposure."

Ten-year Treasury rates declined 6 basis points, or 0.06 percentage point, today to about 3.15 percent, according to BGCantor Market Data. Yields on top-rated, 10-year tax-exempt general obligations were unchanged after falling 2 basis points to 3.12 percent on June 4, data from Concord, Massachusetts- based Municipal Market Advisors showed.

Demand for Cook County's debt, especially $308.6 million in taxable Build America Bonds, should get a boost from its link with a recognized name like Chicago, said Hoogendorn, who's based in the city. The county will also sell $23.3 million in traditional taxable debt, according to Deniece Jordan-Walker, managing director of Gardner, Underwood & Bacon LLC, the financial adviser on the deal.

Issuers in Illinois accounted for about 10 percent of total Build America sales this year through May, amounting to $3.9 billion, according to Bloomberg issuance data. Average Build America yields fell about 16 basis points to 5.75 percent June 4, the biggest one-day drop in more than two weeks, according to a Wells Fargo index.

John Bonnell, who helps oversee $5.2 billion in municipal assets at USAA Investment Management in San Antonio, said risk aversion may prompt municipal investors to re-inject principal and interest payouts they receive this month.

"We're kind of like a dry sponge waiting to absorb that money," he said. "You have a lot of cash hitting the market at the same time."

U.S. employers added 431,000 jobs to nonfarm payrolls in May after an increase of 290,000 the previous month, the Labor Department reported June 4. The median forecast of 82 economists in a Bloomberg News survey was for a gain of 536,000 jobs.

Cook County, which runs the third-largest public hospital system in the U.S., will use proceeds from the Build America sale to equip and renovate health facilities, jails and government buildings, preliminary documents show. In a separate offering, the county will issue $400.3 million in tax-exempt refunding bonds, $242.3 million of taxable refunding notes and $80 million in taxable pension debt.

Loop Capital Markets LLC in Chicago is leading underwriters selling the county's Build America Bonds. The refunding and pension bonds are being marketed by a group led by Morgan Stanley.

Standard & Poor's and Fitch Ratings rates the county's credit AA, and Moody's Investors Service ranks it Aa2, all the third-highest investment grade.

Cook County last came to market with $244.3 million in general obligations Nov. 5. Tax-exempts maturing in 2021 were priced to yield 4.11 percent, 21 basis points more than 12-year general obligations rated AA- on the day of sale, according to Bloomberg Fair Market Value data. The bonds traded June 3 at an average yield of 3.92 percent, 3 basis points higher than the benchmark, Bloomberg data show.