Municipals mostly unchanged ahead of $5 billion new issues; California utilities lead activity

By Sheri Kasprzak

New York, Feb. 11 - The municipals market was quiet to kick off the week, with little trading activity to drive the market and with Treasuries providing little direction, traders said.

"Between five and 10 years, there could be a case made for some firming," one trader said.

"I'd say it's unchanged. There's very little going on, and it's really hard to notice much in the way of changes in either direction."

Beyond a $43 million water offering from the City of Norfolk, Va., another trader said primary action was extremely light as well.

The week ahead will be heavy with competitive offerings, which one market source said simply means most issuers believe they can achieve a better rate that way.

"You know, it's always a tossup," he said.

"Sometimes it's easier to go competitive. Sometimes it makes more sense to go negotiated. A lot depends on market conditions, and then sometimes issuers are just required to sell competitively."

$5 billion ahead

About $5 billion of new issues are expected to hit the market this week, led by two sizeable offerings from two California utilities, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

Both offerings will price competitively on Tuesday.

The San Francisco Public Utilities Commission is slated to price $335,255,000 of series 2013B wastewater revenue bonds (Aa3/AA-/).

Proceeds from the deal will be used to finance capital projects and to retire commercial paper notes.

The City of Los Angeles is set to price $152.4 million of series 2013 solid waste revenue bonds (Aa2/AA/AA-).

That offering will be conducted in two tranches: $71,735,000 of series 2013A bonds due 2014 to 2027 and $80,665,000 of series 2013B refunding bonds due 2014 to 2029.

Proceeds from the L.A. sale will finance solid waste facilities projects and refund the city's series 2003A-B and series 2004A revenue bonds.

Corbett proposes budget

In political news, the Commonwealth of Pennsylvania's Gov. Tom Corbett proposed a $28.4 billion budget last week.

"Gov. Corbett announced his preference for pension plan reform by calling for 401K-style benefits for future employees and adjusting calculations for current workers," Kozlik said Monday.

"The [Pennsylvania] state budget secretary expects such adjustments could save $175 million in 2013-14."

Moody's downgraded Pennsylvania to Aa2 from Aa1, citing its falling pension funding level as one of the reasons for the cut.

"Pennsylvania's pension funding ratio was 97% in 2007, but has since fallen to 68% in 2011 due to weaker-than-expected portfolio performance, the state's underfunded ARC and a rising liability, according to [Standard & Poor's]," Kozlik said.

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