Municipals close weaker along with Treasuries; California announces $1.6 billion bond offering

By Sheri Kasprzak

New York, March 7 - Municipals ended Friday weaker yet again, following closely with Treasuries, which were driven down by improved nonfarm payrolls data, market sources reported.

Yields on tax-exempt triple-A municipals were up by 2 basis points to 5 bps across the yield curve, said a trader.

Nonfarm payrolls, according to the Department of Labor, increased by 175,000, far surpassing economists' estimates of 140,000.

At the end of the day, the five-year Treasury note yield closed higher by 6.5 basis points at 1.636%, and the 10-year note yield rose by 5.5 bps to 2.79%. The 30-year bond yield climbed by 3.5 bps to 3.722%.

The focus Friday was on the coming week's new issue calendar. About $8.5 billion is slated to price, making it one of the busiest weeks so far this year.

Puerto Rico leads offerings

The biggest offering of the week will come from Puerto Rico, which plans to sell its long-anticipated $3 billion of general obligation bonds.

The bonds (Ba2/BB+/BB) will be offered through Barclays, Morgan Stanley & Co. LLC and RBC Capital Markets LLC.

"Notable in the POS is a 14-page [section] listing risk factors," said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"If successful, the issue will rank as the largest tax-free deal ever. As we've noted, a successful issuance is important to the commonwealth since proceeds will be used primarily to restore much-needed liquidity."

Proceeds will be used to repay certain lines of Government Development Bank lines of credit, repay certain bond anticipation notes issued by the Puerto Rico Sales Tax Financing Corp. and refinance outstanding general obligation bonds.

California to offer G.O. bonds

Also on Friday, the State of California announced plans to price $1.6 billion of series 2014 various purpose G.O. bonds (A1/A/A/) through joint bookrunners BofA Merrill Lynch and RBC Capital Markets LLC.

The offering includes $900 million of series 2014 G.O. bonds and $700 million of series 2014 refunding bonds.

Proceeds will be used to fund capital projects, repay commercial paper notes and current and advance refund existing G.O. debt.

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