Muni yields end flat ahead of holiday-shortened week; California Water Resources tops calendar

By Sheri Kasprzak

New York, March 27 – Municipals ended the week unchanged as the market geared up for a short week, traders reported.

Munis ignored rallying Treasuries on the day as it prepared for another week of solid supply. Despite the Good Friday holiday rounding out the week ahead, insiders can expect about $8 billion of new offerings.

That new-issue action will be led by a $765 million sale from the California Department of Water Resources.

Meanwhile, municipal-to-Treasury ratios dropped to the lowest level in two weeks as the 10-year triple-A muni yield fell to 1.96% and the 30-year bond yield fell to 2.80%.

Inflows to municipal mutual funds rose to $581 million for the week, its strongest week in more than a month.

Utilities dominate

Moving to upcoming sales, utilities will dominate the calendar led by California Department of Water Resources’ $765 million of series 2015O power supply revenue refunding bonds (Aa2/AA/AA+).

J.P. Morgan Securities LLC and RBC Capital Markets LLC are the joint bookrunners for the deal.

Proceeds from the offering will refund the department’s series 2008H and 2010L power supply revenue bonds.

Also ahead during the week, the Illinois Municipal Electric Agency has on tap $582,495,000 of series 2015A power supply system revenue refunding bonds through Citigroup Global Markets Inc.

The bonds will refund the agency’s series 2006 and 2007A power supply revenue bonds.

Downgrade postpones deal

Elsewhere, Puerto Rico’s debt was downgraded by Fitch this week to B from BB-. Moody’s Investors Service and Standard & Poor’s downgraded the commonwealth’s debt in February.

The Puerto Rico Infrastructure Financing Authority had been expected to come to market with $2.9 billion of bonds to repay short-term notes due to the Puerto Rico Government Development Bank, but the deal was postponed.

After the downgrade on Thursday, Puerto Rico’s 8% of 2035 bonds were seen at a yield of 10.2% with an average yield of 10.04%, said a market source. Cofina’s bonds are also trading higher with its 6% of 2042s trading above 10% after averaging between 8% and 9% at the beginning of March.

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