Munis end mixed as secondary action picks up; Metropolitan Transportation brings $500 million

By Sheri Kasprzak

New York, March 21 - Municipal yields were mixed on Thursday as secondary activity picked up, market sources reported.

The market gained some strength as recently priced bonds from the New Jersey Turnpike Authority, the City of Sacramento and the University of Delaware freed to trade, said traders.

"That's giving us some strength, but there are spots of weakness," a trader said.

Thursday's action was an improvement over Wednesday's weaker tone.

"The weakness in the secondary market came despite relatively strong demand from the week's largest new issues - a $1.4 billion New Jersey Turnpike Authority deal, a $900 million New York City [Transitional Finance Authority] three-part sale and a $500 million New York [Metropolitan Transportation Authority] deal - which all priced on top of or slightly better than initial levels," said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

New Jersey Turnpike yields cut

On Wednesday, the New Jersey Turnpike Authority sold $1.4 billion of series 2013 turnpike toll revenue bonds, said a pricing sheet.

The bonds (A3/A+/A) were sold through senior manager J.P. Morgan Securities LLC.

The bonds are due 2016 to 2033 with term bonds due in 2038 and 2043. The serial coupons range from 3% to 5%. The 2038 bonds have a 5% coupon priced at 109.354. The 2043 bonds have a split maturity with a 4% coupon priced at par, a 4% coupon priced at 98.285 and a 5% coupon priced at 108.703.

The issue "finalized pricing with yield reductions of 8 basis points in the 2023 maturity and 4 bps in the 4% coupon 2043 maturity," Kozlik said.

MTA bonds price

Elsewhere, the Metropolitan Transportation Authority of New York sold $500 million of series 2013B transportation revenue bonds, said a pricing sheet.

The bonds (A2//A) were sold through Barclays and Rice Financial Products Co.

The bonds are due 2013 to 2034 with term bonds due in 2038 and 2043. The serial coupons range from 1% to 5%. The 2038 bonds have a 5% coupon and priced at 110.677. The 2043 bonds have a split maturity with a 4% coupon priced at 98.261 and a 5% coupon priced at 109.759.

Proceeds will be used to finance transit and commuter projects.

Fitch drops Puerto Rico G.O.s

Looking to ratings news, Fitch Ratings downgraded the general obligation and related debt of the Commonwealth of Puerto Rico (Baa3/BBB-/BBB-) to BBB- from BBB+, a move that comes on the heels of cuts from Moody's Investors Service and Standard & Poor's.

"Fitch's action came the same day that Puerto Rico Governor [Alejandro] Padilla indicated, through his deputy finance minister, that he plans to propose tax increases for the commonwealth's fiscal 2014 budget," Kozlik said Thursday.

"Last week, S&P cut its ratings on Puerto Rico one notch to BBB- in response to limited progress in addressing long-term budget deficits and a much larger-than-forecast FY2013 deficit of $2.2 billion. Higher tax rates would help to address both these fiscal issues. Given the substantial cyclical and structural deficits and the unknown size of theorized tax hikes, however, it's unclear whether the governor's proposal will be substantial enough to protect the commonwealth's credit profile."

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