Municipals close flat to weaker as week's new deals price; Foothill/Eastern deal postponed

By Sheri Kasprzak

New York, Dec. 3 - Municipals were unchanged to slightly off on Tuesday as the week's new issues started pricing, market sources said. Trading action was relatively robust, traders said in the afternoon.

Despite an improved Treasuries market, municipals just couldn't keep up, with yields holding steady in shorter maturities and giving up some ground out long, traders said in the late afternoon.

Meanwhile, the week's largest deal has been postponed. The Foothill/Eastern Transportation Corridor of California will now sell $2,259,586,376.20 of series 2013 toll road revenue refunding bonds (Ba1/BBB-/BBB-) next week.

The offering will be conducted in seven tranches through senior managers Barclays and Goldman Sachs & Co.

Proceeds will refund the agency's series 1999 revenue bonds.

The removal of the deal from this week's new-issue slate will lower the calendar to about $8 billion.

Philadelphia sells TRANs

Amid Tuesday's primary activity, the City of Philadelphia hit the market with $100 million of series 2013-2014A tax and revenue anticipation notes.

The notes (MIG 1/SP-1+/) were sold competitively.

The notes are due June 30, 2014. The deal included a $15 million tranche with a 1.25% coupon priced at 100.599 to yield 0.16%, a $75 million tranche with a 0.75% coupon priced at 100.319 to yield 0.17% and a $10 million tranche with a 1% coupon priced at 100.461 to yield 0.161%, said a pricing sheet.

Proceeds will be used to provide cash to supplement the receipts of the city in the general fund.

Illinois offering ahead

Looking to next week's deals, the State of Illinois will come to market on Thursday with $350 million of series 2013 taxable general obligation bonds on a competitive basis.

The bonds are due 2014 to 2038, and proceeds from the deal will be used to finance capital projects in the state, including school construction and transportation projects.

On Tuesday, the state's legislature approved a pension reform package that would cut retirement benefits for teachers and other state workers. Some of the changes will include raising the retirement age for state employees.

"The lowest-rated of states (A3/A-/A-) also has the most poorly funded pension system, so measures to slow the rise [of] underfunding are important to rating stability," said Alan Schankel, managing director with Janney Montgomery Scott LLC, just ahead of the vote.

Schankel said the vote would impact the G.O. offering.

"The state's planned sale next week of $350 million taxable G.O.s should see lower interest rates if the package is approved," he noted.

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