Municipals close firmer on better Treasuries; Austin offers $104.67 million improvement bonds

By Sheri Kasprzak

New York, Aug. 29 - Municipals closed with a firmer tone as Treasuries improved, market sources reported. Munis have been following Treasuries closely, ending softer on Wednesday and stronger on Tuesday.

Yields were down 1 basis point to 2 bps on news that the United States could take military action against Syria following allegations of the use of chemical weapons against civilians.

Treasury yields were down as well. The 30-year bond was down 2.5 bps to close out the day at 3.71%, and the 10-year note was down 0.5 bp at 2.764%.

Puerto Rico index down 8.88%

Selling pressure is pushing down some indexes, according to a report released Thursday by J.R. Rieger, vice president of fixed-income indexes with S&P Dow Jones Indices.

The S&P Municipal Bond Puerto Rico index is down 8.88% for August and down 14.91% for the year to date, making it the worst annual return seen since 2008, when it was down more than 12.5% for the year, Rieger's report said.

"Heavy selling pressure continues to weigh negatively as the market looks for signs that the territory will get its economic house in order," Rieger said in the report.

Meanwhile, the S&P National AMT-Free Municipal Bond index, which follows investment-grade munis, is down 1.68% for August and down 5.55% year to date, the report said.

Bonds tracked by the S&P AMT-Free Municipal Bond index are yielding a tax-free 3.34%, said Rieger's report. Investment-grade corporate bonds, as tracked by the S&P U.S. Issued Investment Grade Corporate Bond index, are yielding a taxable 3.21%.

"Fund outflows and credit issues continue to mount an attack on the municipal bond market, which has resulted in the municipal bond market now having yields that are significantly cheaper than their corporate bond counterparts," Rieger wrote.

Austin brings debt

In primary action Thursday, the City of Austin, Texas, sold $104,665,000 of series 2013 public improvement bonds, said a pricing sheet. The offering was downsized from $113.25 million.

The bonds (Aaa/AAA/AAA) were sold competitively with Citigroup Global Markets Inc. winning the bid at a 3.922832% true interest cost, said Art Alfaro, Austin's treasurer.

The bonds are due 2014 to 2033 with 2% to 5% coupons.

"The City of Austin has a financial policy in place that states new money deals will be sold competitively, so even though it's not a requirement, we would be violating our financial policies if we sold a new money deal on a negotiated basis," Alfaro said in an interview.

Proceeds will be used to finance various capital improvements in the city.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.