Municipal yields rise amid Treasury sell-off; Fairfax County, Va., prepares $229.9 million deal

By Sheri Kasprzak

New York, Feb. 17 – Municipals dropped on the session Tuesday, following but outperforming diving Treasuries, market insiders reported.

Yields were higher by as much as 5 basis points Tuesday afternoon, said a trader, even as the 10-year Treasury note yield rose by 12 bps and the 30-year yield rose by 10 bps.

The holiday-shortened week will be somewhat lighter in terms of supply with about $6 billion expected.

Fairfax deal set

Looking to Wednesday’s primary action, Fairfax County, Va., is on tap to price $229,905,000 of series 2015A public improvement bonds.

The bonds (Aaa/AAA/AAA) will be sold competitively and are due 2015 to 2034.

Proceeds will be used to finance school, transportation, parks, public safety and storm drainage facility improvements.

States rebuild flexibility

Elsewhere during the session, Fitch Ratings released a report stating that most U.S. states have rebuilt their financial flexibility in the post-recession environment.

“As U.S. states work through budget negotiations for fiscal years that begin this July 1, they do so under credit conditions that have improved significantly since the recession,” Fitch managing director Laura Porter said in the statement.

“This solid position from which to manage uncertainty, strong shared credit fundamentals and manageable long-term liabilities account for the fact that 90% of Fitch’s rated states carry a stable outlook.”

State have largely benefited from employment growth, but state-by-state recovery varies considerably, the Fitch analysts noted.

The return to pre-recession peak employment levels has been slow, they said in the statement. Only 31 states had reported fully recovered employment by December.

Meanwhile, debt levels for states are still low with annual debt service representing a small portion of budgets, the statement said. Median net tax-supported debt is 2.6% of personal income, according to the analysts. The media states’ adjusted unfunded pension liabilities is 3.3% of personal income, and the median combined liability is 6.1%.

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