Municipals close mostly flat amid light trading action; high-yield bonds led defaults in 2014

By Sheri Kasprzak

New York, Jan. 13 – Tuesday was a light day for municipals in both the primary and secondary segments, traders said, keeping municipals relatively flat.

Treasuries didn’t do much to move the market either with an anemic performance following a lackluster 10-year note auction.

The market is set to crank back up Wednesday as the New York City Transitional Finance Authority is set to offer its $750 million bond deal to institutional investors.

Default rate up

Energy bonds, as part of the high-yield bond segment, helped push the municipal bond default rate to a three-year high, said J.R. Rieger, global head of fixed income with S&P Dow Jones Indices in a report released Tuesday.

In 2014, the default rate of the S&P Municipal Bond index rose for the first time since 2011, Rieger said, ending the year at 0.17%. In 2013, the rate fell to 0.107% from 0.144% in 2012.

The corporate bond sector of the muni market has had a higher propensity for default, Rieger’s report said. According to default data from 2014, the trend might be correcting itself in the high-yield space with the high-yield default rate jumping to 1.264% in 2014 from 0.78% in 2013.

Orange Sanitation sells debt

Amid Tuesday’s primary activity, the Orange County Sanitation District of California offered up $127.51 million of series 2015A wastewater refunding revenue obligations, said a pricing sheet.

The bonds (/AAA/AAA) were sold competitively.

The bonds are due 2028 to 2031 and 2034 and 2037. The bonds have 5% coupons and yields from 2.03% to 2.50%.

Proceeds will be used to prepay and retire a portion of the district’s series 2007B certificates of participation.

New Trier High School prices

Moving to the competitive market Tuesday, the New Trier Township High School District No. 203 of Illinois hit the market with $88.98 million of series 2015A general obligation school building bonds.

Citigroup Global Markets Inc. won the bid for the bonds (Aaa) at a 2.77736% true interest cost.

The bonds are due 2015 to 2034 with 2% to 3.5% coupons and 0.15% to 3.35% yields.

Proceeds will be used to improve, replace, renovate and acquire school buildings within the district.

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