Municipals improve with Treasuries; Massachusetts State College Building Authority bonds price

By Sheri Kasprzak

New York, Dec. 10 - Municipals got a boost on Tuesday mostly from improved Treasuries and ahead of a much-lighter new issue calendar in the coming week, market sources said.

Yields were down by 2 basis points to 3 bps, following on the heels of much-better Treasuries, with long bonds seeing the most improvement. The 30-year Treasury bond yield fell by 4.3 bps to end at 3.831%, and the 10-year note yield fell by 4 bps to 2.801%.

One trader said in the afternoon that although better Treasuries certainly helped boost municipals during the session, the holiday season is also giving the market a boost. Despite the $12 billion calendar for this week, buoyed mostly by a handful of very large offerings, the coming week's calendar will taper off substantially ahead of the holiday.

"Next week, supply will be much lighter, and I think the market is sort of reacting early to this reduction in supply pressure," the trader said.

Massachusetts State College Building Authority bonds sold

Among the new offerings that priced during the day, the Massachusetts State College Building Authority priced $136.49 million of series 2014A project revenue bonds, said a pricing sheet.

The bonds (Aa2/AA/) were sold competitively with BofA Merrill Lynch wining the bid at a 4.15% true interest cost, said Karol Ostberg, chief financial officer for the authority.

The bonds are due 2015 to 2034 with term bonds due in 2038, 2043 and 2048. The serial coupons range from 2% to 5% with yields ranging from 0.25% to 4.12%. The 2038 bonds have a 5% coupon and priced at 105.242 to yield 4.31%. The 2043 bonds have a 5% coupon and priced at 104.617 to yield 4.39%, and the 2048 bonds have a 4.5% coupon and priced at 95.781 to yield 4.75%.

Ostberg said Tuesday that the authority is not required to sell its debt competitively.

"We consider a number of factors before deciding which method to sell. Market conditions is one of them," she said.

Proceeds will be used to finance improvements to academic and residence halls and to make other improvements at various colleges and universities within the commonwealth.

Puerto Rico's economy grows

Moving to data, the Puerto Rico Government Development Bank's most recent release of its Economic Activity index indicates that the commonwealth's economy grew in September and October by 1.1% and 0.6%, respectively. It's the first monthly increase in the index since November 2012. Even so, the reading is still more than 5% below the year-ago levels.

"On a fiscal 2014-to-date basis (July to October), the index is 5.3% below the same period of 2012," said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"Although we are mildly encouraged by the MoM improvement, we'd also point out that there is a seasonal aspect to consider since the EAI has risen in September and October of each of the past three years."

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