Municipals finish week firmer by 1 to 2 bps; New Jersey Transportation Trust Fund deal ahead

By Sheri Kasprzak

New York, April 29 - Municipals closed out another week on a firmer note, with yields seen better by 1 to 2 basis points across the curve, market insiders reported.

"It's been pretty quiet," said one trader of Friday's trading activity.

"Short bonds are probably firmer by 2 [bps] and longer bonds by a basis point."

The rally marks three weeks of improvement for municipals, which had struggled with softness in February and March.

"Despite the uncertain impact of the economic cycle on municipalities, municipal bonds have rallied due to fundamentals," said J.R. Rieger, vice president of fixed-income indexes at Standard & Poor's. "Low supply and good demand, attractive yields relative to other fixed-income asset classes all coupled with a lower interest rate environment have contributed to the muni market's positive returns."

The week ahead will prove to be another light week for supply. The primary calendar will be highlighted by a $600 million sale of series 2011A transportation system bonds from the New Jersey Transportation Trust Fund.

The bonds, said Alan Schankel, managing director with Janney Montgomery Scott LLC, are appropriation backed like much of the state's debt.

"Security is provided by contract payments from the state, but since payments are subject to annual legislative appropriation, the rating is one notch below the state's G.O. rating," Schankel said.

"S&P's January downgrade of the state, followed by Moody's drop earlier this week, cut the ratings of $12.1 billion in outstanding transportation trust bonds one notch, though the outlook from both agencies is stable."

The bonds (A1//AA) are set to price on Wednesday via negotiated sale, and proceeds will fund transportation-related capital projects.

Oregon preps deal

Also in the week ahead, the State of Oregon is gearing up to bring $177.92 million of series 2011 general obligation bonds (Aa1/AA+/AA+) through Merrill Lynch and Citigroup Global Markets Inc.

The offering includes $49.69 million of series 2011E bonds, $6.29 million of series 2011F bonds, $52.185 million of series 2011G bonds and $69.755 million of series 2011H bonds.

Proceeds will finance projects within the Oregon University System.

Ochsner sale ahead

In other news for the week ahead, the Louisiana Public Facilities Authority is set to sell $150 million of series 2011 revenue bonds for the Ochsner Clinic Foundation.

Citigroup is the senior manager for the bonds (Baa1//BBB+), which are due 2017 to 2021 with term bonds due in 2031 and 2041.

Proceeds will be used to finance and refinance the costs of acquiring, constructing, renovating and repairing hospital and health-care facilities.

Chelan district bonds to come

Elsewhere, the Public Utility District No. 1 of Chelan County in Washington state plans to bring to market $189.33 million of series 2011 refunding bonds, said a preliminary official statement.

The sale includes $114.735 million of series 2011A AMT bonds and $74.595 million of series 2011B AMT bonds.

The bonds (Aa2/AA/AA+) will be sold on a negotiated basis with Barclays Capital Inc. as the senior manager.

The 2011A bonds are due 2012 to 2026 with term bonds, the maturities of which have not been set. The 2011B bonds are due 2012 to 2026, also with term bonds.

Proceeds will be used to refund senior consolidated system bonds.

The district's headquarters are in Wenatchee, Wash.

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