Municipals stronger ahead of an $8 billion calendar; Puerto Rico listed day-to-day after delay

By Sheri Kasprzak

New York, Aug. 21 – Municipals strengthened on the day Friday, following stronger Treasuries, market insiders said.

Yields on top-rated munis fell by as much as 3 basis points, said a trader in the late afternoon. Meanwhile, Treasuries saw yields fall 2 bps to 6 bps.

Elsewhere, the municipal/Treasuries ratios were pushed to the highest level in months. The 10-year MMA benchmark fell to 2.20% Thursday, equal to 106% of the comparable Treasury yield, said a market source Friday morning. Thursday’s 30-year M/T ratio was pushed to 115%.

The week saw the most trading activity in some time, with the MSRB’s trading volume at $9.5 billion.

Muni bond funds saw inflows of $44 billion in the week ended Aug. 9, according to Lipper.

PRASA deal day-to-day

Looking to the coming week, $8 billion of new offerings are on the calendar so far. Missing from the week’s calendar is Puerto Rico Aqueduct and Sewer Authority’s $750 million revenue bond sale, which is now listed day-to-day.

“Despite some tweaking of security features, investor interest in the PR issue is apparently lacking, notwithstanding a reported yield as high as 10% for the 30-year maturity,” said Alan Schankel, managing director with Janney Montgomery Scott LLC.

“Perhaps investor caution derives from the backdrop of an Aug. 1 default on the Puerto Rico Public Finance Corp. and the commonwealth’s plan to present a broad debt restructuring proposal by Sept. 1.”

New Jersey bonds top slate

Heading up the coming week’s new-issue slate is the New Jersey Economic Development Authority’s three-tranche school bond sale. The bonds (//A-) are scheduled to price Tuesday through BofA Merrill Lynch.

The $2.22 billion offering is one of the largest deals of 2015.

The deal includes $500 million of series 2015WW school facilities construction bonds, $860 million of series 2015XX school facilities construction refunding bonds and $860 million of series 2015YY taxable school facilities construction refunding bonds.

Proceeds will finance school construction projects and refund outstanding school debt.

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