Yields end mostly flat ahead of $6 billion of new deals; University of California plans sale

By Sheri Kasprzak

New York, Feb. 22 - Muni yields were mostly unchanged on Friday as secondary action picked up somewhat, said traders.

"We are seeing quite a bit of activity, particularly from single-A names," a trader said.

Meanwhile, the week ahead will provide investors with about $6 billion of new offerings, led by a $1,586,515,000 offering from the University of California.

The university is set to price series 2013 general revenue bonds and notes in three tranches.

The deal includes $800 million of series 2013AF bonds and $500 million of series 2013AG bonds, which will be sold through J.P. Morgan Securities LLC and Wells Fargo Securities LLC, and $286,515,000 of series 2013H taxable fixed-rate notes, which will be sold through BofA Merrill Lynch.

"Further ahead, fresh on the heels of an upgrade to A by [Standard & Poor's], California announced a $2.5 billion issue for March," said Alan Schankel, managing director with Janney Montgomery Scott LLC.

Puerto Rico on negative watch

Looking to ratings news, the Commonwealth of Puerto Rico's general obligation bonds were put on negative watch by Fitch Ratings.

"As reported earlier in the week via MMA, the FY13 budget deficit will likely exceed the originally forecast $1.1 billion (lower if $700 million of bond refinancing is considered)," Schankel said.

"Despite aggressive expense reduction, the structural deficit continues, as budgeted revenue levels were not realized. The new administration is soon expected to detail proposed reforms to the commonwealth's woefully underfunded pension systems."

Fitch rates Puerto Rico's G.O. bonds BBB+.

"The rating watch negative reflects Fitch's expectation of a significant increase in the commonwealth's estimated operating imbalance for the current and coming fiscal years, based on reported revenue results through the first half of the current fiscal year and public statements by the new administration," Fitch senior director Karen Krop said in the report.

Fitch intends to resolve the watch early in March when it meets with representatives from the commonwealth.

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