Municipals close flat to firmer as market awaits $4 billion calendar; Massachusetts bonds set

By Sheri Kasprzak

New York, Dec. 13 - Municipals rounded out the week on a firmer note with yields mostly unmoved, traders reported.

With just $4 billion of new deals coming up in the week ahead, supply is comparatively low and demand remains strong, said one trader.

"Yields have been dropped in a lot of recent deals, and I suspect it's in anticipation of this drop in supply," he said.

"It will be interesting to see how yields respond to this decline [in supply] as the holidays approach."

The one big offering on the week's calendar is the Commonwealth of Massachusetts' planned $525 million competitive offering of series 2014A consolidated loan general obligation bonds.

The bonds are due 2016 to 2019 and 2031 to 2043.

Proceeds will finance the commonwealth's current capital spending plan.

Foothill/Eastern deal prices

One major deal did price on Friday. The long-anticipated and recently delayed offering of $2,494,160,000 of series 2013 toll road revenue refunding bonds from the Foothill/Eastern Transportation Corridor District of California priced.

The offering included $1,374,440,000 of series 2013A current interest refunding bonds, $546.67 million of series 2013A capital appreciation bonds, $125 million of series 2013B-1 current interest bonds, $125 million of series 2013B-2 current interest bonds, $125 million of series 2013B-3 current interest bonds and $198.05 million of series 2013C junior lien current interest bonds, according to pricing sheets.

The 2013A current interest bonds are due Jan. 15 of 2042, 2046, 2049 and 2053. The 2042 bonds have a 5% coupon and priced at 95.643 to yield 5.30%, and the 2046 bonds have a 5.75% coupon and priced at 95.773 to yield 6.05%. The 2049 bonds have a 6% coupon and priced at 96.459 to yield 6.25%. The 2053 bonds have a 6% coupon and priced at 94.281 to yield 6.40%.

The 2013A capital appreciation bonds are due 2020 to 2024 and 2036 to 2039 with a term bond due in 2042. The 0% coupon bonds have 3.75% to 6.40% yields. The 2042 bonds have a 0% coupon and priced at 14.046 to yield 7.125%.

The 2013B-1 bonds are due Jan. 15, 2053, have a 5% coupon and priced at 107.706 to yield 2.70%.

The 2013B-2 bonds are due Jan. 15, 2053, have a 5% coupon and priced at 105.555 to yield 3.875%.

The 2013B-3 bonds are due Jan. 15, 2053, have a 5.5% coupon and priced at 104.319 to yield 4.875%.

The 2013C bonds are due Jan. 15, 2033 and Jan. 15, 2043. The 2033 bonds have a 6.25% coupon and priced at 98.9 to yield 6.35%. The 2043 bonds have a 6.5% coupon and priced at 98.711 to yield 6.60%.

The bonds (Ba1/BBB-/BBB-) were sold through Barclays and Goldman Sachs & Co.

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

Puerto Rico still pressured

Elsewhere during the session, J.R. Rieger, vice president of fixed-income indexes with S&P Dow Jones Indices, said that Puerto Rico is now under review for a possible downgrade to below investment grade.

"Selling pressure continues to mount, impacting the market," Rieger wrote Friday.

"The S&P Municipal Bond Puerto Rico index has seen a negative total return of 19.45% year-to-date, and the weighted average price of bonds in the index has fallen by over 24% this year. The weighted average yield of bonds in the index ended at 7.26%, or 419 basis points higher than investment-grade bonds."

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