Municipals round out week slightly firmer as supply pressure eases; Puerto Rico prices after negative outlook

By Sheri Kasprzak

New York, June 8 - Municipals closed out a tough week on a mostly firmer note, market insiders reported, as supply pressure lifted and secondary action picked up.

"There's an overall firmer feeling to the market, especially since most of the week's deals have already priced," said a trader.

"Intermediate and long yields are somewhat firmer, maybe a basis point or two."

The improved tone reversed a four-day trend of higher muni yields.

On Thursday, the 10-year MMD yield was up 5 bps to 1.9% and the 30-year AAA yield closed at 3.19%, up 14 bps higher than the beginning of the week, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

"This week's move higher has likely caused some refundings to be [put] on hold until yields fall again, keeping limited amount of primary market supply out of the market this week," said Kozlik.

Puerto Rico bonds price

In primary action, the Puerto Rico Public Buildings Authority came to market with $588,945,000 of series U government facilities revenue refunding bonds, said a pricing sheet.

The bonds (Baa1/BBB/BBB+) were sold through Goldman, Sachs & Co.

The bonds are due 2014 to 2023 with a term bond due in 2042. The serial coupons range from 4% to 5.25%. The 2042 bonds have a 5.25% coupon priced at 98.145.

Proceeds will be used to refund all of the authority's series J bonds and to refund all or a portion of its series D and G bonds.

"The authority is rated the same as the commonwealth of Puerto Rico's general obligation rating," said Kozlik.

"This pricing was two days after Standard & Poor's lowered the commonwealth's rating outlook to negative from stable due to economic and budgetary challenges. Moody's affirmed its BBB rating with a negative outlook and Fitch confirmed its BBB+ and stable outlook recently."

Dasny, L.A. deals ahead

Looking to the coming week, volume will remain steady. No exact supply estimate was available Friday, but a major offering from the Dormitory Authority of the State of New York, which would total up to $3.7 billion, is expected to price on Tuesday, along with several other large deals.

The Dasny offering will finance capital projects at the State University of New York, The City University of New York and SUNY Upstate Community College facilities and refund various maturities of the series 2000A-B Metropolitan Transportation Authority state service contract bonds and personal income tax revenue bonds issued by Dasny and the Empire State Development Corp.

Goldman, Sachs & Co. is the senior manager.

Also on Tuesday, the Los Angeles Unified School District is set to price $650 million of tax and revenue anticipation notes competitively.

The notes are due Feb. 28, 2013, and proceeds from the offering will be used to finance the general capital needs of the school district ahead of the collection of certain taxes and revenues.

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