Municipals firm as Treasuries get boost from foreign turmoil; Austin prices $144.47 million

By Sheri Kasprzak

New York, Aug. 28 – Municipals improved on the session Thursday as Treasuries got a boost from continued tension in Ukraine, traders said.

Yields across the curve were seen lower by 2 basis points to 3 bps, underperforming Treasuries. Turmoil in Ukraine amid talk that Russia deployed tanks to the country sent investors to safe havens like U.S. Treasuries.

The 10-year benchmark Treasury yield fell by 4 bps to close the day at 2.33%, the 30-year bond yield fell by 4 bps to 3.07%, and the five-year note yield fell by about 2 bps to 1.62%.

Massive Detroit deal insured

Both National Public Finance Guarantee and Assured Guaranty Ltd. insured portions of Michigan Finance Authority’s $1,791,865,000 Detroit Water and Sewerage Department bond offering on Wednesday, wrapping about 63% of the deal.

“An unusual transaction such as this complicated Detroit financing may not be a valid indicator of relative value between the two insurers, but if National plans to re-enter the underwriting fray near-term, it will need to demonstrate stronger value for its wrapper than spreads on the issue seem to indicate,” Alan Schankel, managing director with Janney Montgomery Scott LLC, wrote on Thursday.

Yields reportedly dropped on the bonds Thursday after they were freed to trade.

The bonds (//BBB+) priced through Citigroup Global Markets Inc.

The massive deal included 14 separate tranches: $123.22 million of series 2014C-1 water bonds, $27.47 million of series 2014C-2 AMT water and sewer bonds, $447,325,000 of series 2014C-3 water bonds, $95,165,000 of series 2014C-5 water and sewer bonds, $143.88 million of series 2014C-6 water bonds, $76,715,000 of series 2014C-7 water and sewer bonds, $23.24 million of series 2014C-8 water and sewer bonds, $206.54 million of series 2014D-1 water and sewer bonds, $188,455,000 of series 2014D-2 water and sewer bonds, $62.7 million of series 2014D-3 water and sewer bonds, $307,645,000 of series 2014D-4 water bonds, $9.27 million of series 2014D-5 taxable bonds, $65,425,000 of series 2014D-6 water bonds and $14,815,000 of series 2014D-7 water bonds.

Proceeds from the offering will be used to finance the city’s tender offer, to refund existing water and sewer bonds and to make improvements to the city’s water and sewer infrastructure.

Austin brings debt

Elsewhere during the session, the City of Austin, Texas, came to market with $144,465,000 of series 2014 public improvement bonds and certificates of obligation.

The deal included $89,915,000 of series 2014 public improvement bonds, $40.45 million of series 2014 COPs and $14.1 million of series 2014 public property financial contractual obligations, said a pricing sheet.

The public improvement bonds are due 2014 to 2034 with 3% to 5% coupons and 0.20% to 2.96% yields.

The COPs are due 2015 to 2034 with coupons from 2% to 5% and yields from 0.20% to 2.96%.

The contractual obligations are due 2015 to 2021 with 3% to 5% coupons and 0.17% to 1.80% yields.

The bonds (Aaa/AAA/AAA) were sold through senior managers Baird & Co. Inc. and Cabrera Capital Markets LLC.

Proceeds will be used to finance capital improvements and purchase equipment or personal property for the city.

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