Municipal yields rally as new issues hit the market; downgrades outnumber upgrades, Fitch says

By Sheri Kasprzak

New York, July 12 - Municipal yields were again firmer on Thursday, said traders.

Yields were better by 4 basis points to 5 bps, particularly outside of 10 years. Shorter bonds were better by 2 bps to 3 bps, said traders reached in the afternoon.

Treasuries were improved on Thursday, and the new issues that came to market saw good terms and plenty of investor interest, market insiders reported.

Fitch says downgrades rule

Meanwhile, in rating agency news, Fitch Ratings reported Thursday that for the 13th consecutive quarter, U.S. public finance rating downgrades outnumbered upgrades.

"Downgrades still account for a small percentage of total public finance rating actions," the Fitch report said.

"Fitch downgraded 45 credits, which represented approximately 5% of all rating actions and $16.1 billion in par value. In the fourth quarter of 2011, Fitch downgraded 60 credits. Fitch upgraded 23 credits [in the first quarter of 2012], which represented 2.8% of all rating actions and $6.3 billion in par value. In the fourth quarter of 2011, Fitch upgraded 25 credits."

The majority of ratings actions - 78% - taken by Fitch in the first quarter were affirmations. A total of 88% of ratings had a stable rating outlook at the end of the first quarter, Fitch said.

New York Transitional prices

Leading the day's primary action, the New York City Transitional Finance Authority priced $850 million of fiscal 2013 series S-1 building aid revenue bonds, said a term sheet.

The bonds are due 2014 to 2033 with term bonds due in 2037 and 2042. The serial coupons range from 3% to 5%. The 2037 bonds have a 5% coupon and priced at 113.092, and the 2042 bonds have a 4% coupon and priced at 100.491.

Yields were adjusted by as much as 7 bps lower from the retail order period due to strong demand, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

Proceeds will be used to pay a portion of the costs of one or more of the five-year plans approved by the authority for educational facilities.

DeKalb school bonds price

In other primary news, the DeKalb County School District of Georgia came to market with $90 million of series 2012 tax anticipation notes, said a pricing sheet.

The notes were sold competitively with TD Securities (USA) LLC winning the bid with a 0.56% net interest cost, said Jeff Dickerson, spokesman for the district.

The notes are due Dec. 28, 2012 and have a 0.95% coupon to yield 0.55%.

"The previous year's TAN had a net interest cost of 0.42%," Dickerson said Thursday.

"The majority of the difference in rates from the last year to this year can be attributed to the fact that we are borrowing more ($75 million last year versus $90 million this year) and the length of time to borrow (five months last year versus six months this year)."

Proceeds will be used to finance current expenses for the district ahead of the collection of property taxes.

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