Municipals improve, underperform rallying Treasuries; Ohio Administrative Services bonds price

By Sheri Kasprzak

New York, May 13 - Municipals were better on the day but underperformed Treasuries, which rallied following lackluster retail sales data, market sources reported.

Yields on shorter bonds were seen lower by about 2 basis points with longer yields falling by about 3 bps, traders said in the afternoon. Alleviated secondary market pressure was credited with most of the muni price gains seen on the session.

Meanwhile, April retail sales fell below economists' expectations, gaining just 0.1% on the month, well below the 0.4% level that was anticipated.

The 10-year Treasury note yield fell by 5 bps to end the day at 2.607%, the 30-year bond yield fell by 5 bps to 3.442%, and the five-year note yield fell by 4.5 bps to 1.613%.

Ohio COPs price

Heading up the day's primary activity, the Ohio Department of Administrative Services sold $65.15 million of series 2014A refunding certificates of participation.

The COPs (Aa2/AA/) were sold competitively.

The COPs are due 2015 to 2018 with 4% to 5% coupons and 0.18% to 1.13% yields, said a pricing sheet.

Proceeds will be used to refund existing COPs.

Puerto Rico misses projections

Moving to Puerto Rico news, the commonwealth's April revenues were released over the weekend, missing projections by 27%, or $442 million. Year-to-date revenues were reportedly $7.6 billion, about 4.7% below projections for the yearly number.

"With apparent progress made July through March towards narrowing this year's budget gap to $650 million, the April shortfall, if not offset by May and June revenue, may leak into the fiscal year 2015 budget, which the government has said will be balanced," wrote Alan Schankel, managing director with Janney Montgomery Scott LLC.

"Most of the revenue miss was in the corporate income tax column, where only about half of projected revenue was received, but the Treasury Secretary's communication noted that 53% of corporate filers made no payment, requesting the allowed two-month extension."

In trading, Puerto Rico's 8% bonds due 2035 were seen trading at an average yield of 8.79% last week. On Monday, they sold off with average yields 20 bps higher at 9%.

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