Munis sink along with Treasuries; $3.5 billion of new supply expected this week after holiday

By Sheri Kasprzak

New York, Sept. 8 – Municipals weakened Tuesday as the market cranked back up after the Labor Day holiday, traders said. Yields on top-rated munis rose by 3 basis points to 5 bps.

The market struggled with Treasuries after the Treasury Department auctioned $24 billion of three-year notes at a yield more than 5 bps higher than where the notes were trading at the time.

The weak auction caused the 30-year Treasury bond yield to jump by 8 bps to close at 2.97%. The 10-year benchmark note yield rose by 7 bps to 2.20%, the five-year note yield climbed by 6 bps to 1.53%, and the two-year note yield rose by 3 bps to 0.74%.

About $3.5 billion ahead

The slate for the holiday-shortened week will be just about $3.5 billion assuming the Puerto Rico Aqueduct and Sewer Authority doesn’t price its $750 million of revenue bonds (Caa3/CCC-/CC). The deal is still listed day-to-day.

The likelihood of pricing this week is slim given a restructuring plan proposed by a group led by Gov. Alejandro Garcia Padilla. On Tuesday, New York Gov. Andrew Cuomo was in Puerto Rico to discuss a partnership to help the island resolve its debt problem.

The proposed restructuring plan reportedly will inject $1.5 billion of capital expenditures over five years.

This injection would come from cutting $1 billion of operating expenses. Cuts include school, university and health-care expenditures. The commonwealth has also recently implemented a sales tax increase to 11.5%.

North Texas bonds set

Heading up the week’s slate, the North Texas Tollway Authority is on tap to price $750 million of series 2015B system first-tier revenue refunding bonds (A1/A/).

The bonds are slated to price Thursday through senior managers Barclays and Loop Capital Markets LLC.

The bonds are due 2016 to 2035.

Proceeds will be used to refund a portion of the authority’s series 2008A-B and 2009A revenue bonds.

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