Munis remain firmer ahead of $8 billion calendar; New York City Transitional plans bond deal

By Sheri Kasprzak

New York, July 6 - Yields were a touch firmer on Friday as Treasuries improved, market insiders reported. New issue volume officially dried up, but a trader said secondary action picked up.

"It's been slow, and I think folks are just about ready to call it a week," he said.

"Trading did pick up some this morning. We're seeing slightly more interest than earlier in the week."

In contrast to the very slow, holiday-interrupted week, the week ahead may prove to be quite busy, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"With no primary issuance and little secondary activity, the municipal market is all but closed heading into the weekend," Schankel said Friday.

Schankel said that about $8 billion of new issues will come to market in the coming week.

"New York issues top the slate with $850 million [New York City Transitional Finance Authority] and $500 million Metropolitan Transportation Authority scheduled," Schankel wrote.

TFA prepares offering

The Transitional Finance Authority is scheduled to come to market Tuesday with $850 million of fiscal 2013 series S-1 building aid revenue bonds through J.P. Morgan Securities LLC.

The authority intends to use the proceeds from the sale to pay a portion of the costs of one or more of the five-year plans approved by the authority for educational facilities.

Pennsylvania to help schools

In other municipals news Friday, the Commonwealth of Pennsylvania's governor signed a law to improve the oversight of financially stressed school districts, said Schankel.

"School districts are not eligible for the state's Act 47 program for distressed municipalities, so the new legislation fills a gap, with Moody's [Investors Service] noting that the increased state oversight is a credit positive for Pennsylvania school districts," Schankel wrote.

"The law creates an Office of Economic Recovery within the state department of education to identify districts experiencing financial strain and gives the secretary of education power to appoint a recovery officer and control board to oversee any district deemed distressed."

Schankel noted that Pennsylvania's Chester-Upland school district avoided closure recently when the state provided extra funding under a court order. The Duquesne and Harrisburg school districts may also qualify for this sort of intervention, Schankel said.

"Bondholders of Pennsylvania school districts benefit from a program which intercepts and redirects state aid to the paying agent for bondholder benefit in the event debt service payments are missed," Schankel wrote.

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