Municipals ends week with rally amid solid supply; 10-year, 30-year yields fall 4 basis points

By Sheri Kasprzak

New York, May 29 – Municipals spent the week rallying. The Memorial Day holiday shortened the week and stemmed a recent flood of supply, but new-issue action remained solid throughout the week, market insiders said.

Friday saw yields on top-rated 10-year munis fall by 4 basis points to close at 2.19% and 30-year bonds fall by 4 bps to 3.16%.

The muni market outperformed Treasuries, which were also stronger after a contraction for first-quarter gross domestic product. Both the 10-year Treasury note yield and 30-year bond yield fell by 1 bp on the session to close at 2.12% and 2.88%, respectively.

Highway projects to slow

Elsewhere in the market, Fitch Ratings analysts said Friday that highway and transit projects are likely to slow or even stop despite the two-month extension of the current refunding program Moving Ahead for Progress in the 21st Century.

“We believe uncertainty about funding will remain and that will add to the pressure for states to explore alternate transportation funding and procurement strategies and lessen their dependence on the federal system,” analysts Scott Zuchorski, Eric Kim and Rob Rowan said in a report released Friday.

“In addition to new revenues, an increasing number of states are revisiting their approach to larger capital projects, including considering and in some instance utilizing public-private partnerships.”

L.A. County leads deals

Looking to the new-issue supply for the week ahead, Los Angeles County will top the calendar with its $900 million offering of short-term notes.

The tax and revenue anticipation notes will be offered through BofA Merrill Lynch and Citigroup Global Markets Inc.

The notes are due June 30, 2016, and proceeds will fund the county’s capital expenditures for the 2015-2016 fiscal year.

NYC G.O. bonds ahead

Another major player will be in the market in the week ahead. The City of New York is readying a $600 million offering of general obligation bonds through J.P. Morgan Securities LLC.

The deal, set to price Tuesday, will include $300 million of series 2015F-1 tax-exempt bonds, $105 million of series 2015F-2 taxables and $195 million of series 2015F-3 taxables.

The city plans to use the proceeds from the offering for capital purposes.

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