Municipal yields firm in areas along with Treasuries; $8 billion of new issues await investors

By Sheri Kasprzak

New York, Feb. 25 - After getting off to a rocky start Monday, municipals were flat to a bit firmer following a Treasury market rally, market insiders reported.

"We followed Treasuries really closely today," a trader said.

News on Italy's elections and the possibility of a hung parliament gave Treasuries strength, said another trader. Ten-year benchmark yields were down 10 basis points by the end of the session.

Muni yields were down by 3 bps to 5 bps in spots and unchanged in others, with most of the improvement seen around 10 years and in. A lot of secondary action was seen in maturities 10 years and in, said market sources.

Meanwhile, muni market demand remains positive, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

Inflows were seen at $840 million for the week ended Feb. 13, Kozlik said Monday.

"Supply is expected to notch up slightly over the next few weeks," he noted.

"This week, we are expecting about $8 billion of issuance, led by a $1.3 billion University of California sale. The Houston Community College System also anticipates selling $400 million of bonds on a negotiated basis."

New York deal set

Also ahead during the week, the City of New York is slated to bring $850 million of series 2013 general obligation bonds in four tranches.

The deal includes $500 million series 2013F-1 tax-exempt bonds, $100 million of series 2013F-2 taxable bonds, $20 million of series 2013G tax-exempt bonds and $230 million of series 2013H tax-exempt bonds.

The bonds will be sold through Morgan Stanley & Co. LLC.

Proceeds will be used to finance capital projects for the city.

University of California sale includes three tranches

Moving back to that University of California deal, the university is expected to bring $1,586,515,000 of series 2013 general revenue bonds.

The deal includes $800 million of series 2013AF bonds and $500 million of series 2013AG bonds as well as $286,515,000 of series 2013H taxable fixed-rate notes.

The bonds will be sold through J.P. Morgan Securities LLC and Wells Fargo Securities LLC, and the taxable notes will be sold through BofA Merrill Lynch.

Proceeds from that deal will refund the university's series 2003A-B and 2005C-G general revenue bonds.

Negative outlook

Looking to ratings news, Moody's Investors Service assigned a negative outlook to the U.S. local government municipal sector.

"The rating agency noted its outlook 'remains negative as revenue constraints and expenditure demands persist against the backdrop of a slow and uneven economic recovery,'" Kozlik said Monday.

Kozlik noted that Janney Montgomery Scott also has a negative outlook on the sector as well as the school district sector.

Moody's also noted that although circumstances and credit profiles vary by location and type of municipal government, there are common themes, including weak overall economic recovery characterized by slow growth rates and mixed employment indicators, expected federal spending cuts, ongoing constraints in key revenues derived from state aid and property taxes and increasingly difficult budget decisions following years of spending reductions and deferrals.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.