Municipals edge lower as Treasuries smacked by Fed meeting; California prison bonds delayed

By Sheri Kasprzak

New York, Oct. 28 – Municipals slipped on Wednesday after Treasuries took a hit on news that the Federal Open Market Committee could still hike interest rates at the end of the year, market insiders said.

Yields on top-rated municipals rose by about 1 basis point in spots, even as the five-year Treasury note yield jumped 9 bps and the 10-year yield rose 5 bps in response to the Fed’s post-meeting statement released Wednesday.

During the session, the FOMC noted that even though it will hold short-term rates in a range between 0% and 0.25%, it will leave the door open to a December rate hike.

California prison deal delayed

Moving to the broader muni market, the week’s new-issue calendar was shaved down even more after the California State Public Works Board postponed its $223,155,000 offering of lease revenue bonds for Corcoran State Prison.

The offering had been slated for Thursday, but the bonds will now price on Nov. 12, said an amendment to the preliminary official statement.

The bonds (A1/A+/A) will be sold competitively.

Proceeds will finance capital improvements to the prison.

Tennessee downsizes bond

Among the larger offerings priced this week, the State of Tennessee sold $385.59 million of series 2015 general obligation bonds. The deal was downsized from $416.32 million.

The bonds (Aaa/AA+/AAA) were sold through Morgan Stanley & Co. LLC.

The deal included $287,765,000 of series 2015A G.O. bonds and $97,825,000 of series 2015B refunding bonds.

The 2015A bonds are due 2016 to 2035 with 2% to 5% coupons and 0.20% to 2.80% yields.

The 2015B bonds are due 2016 to 2028 with 3% to 5% coupons and yields from 0.08% to 2.54%.

Proceeds will be used to finance statewide capital projects, retire at maturity certain commercial paper notes and refund the state’s series 2009A and 2010A G.O. bonds.

Texas brings G.O. bonds

Another state deal came from the State of Texas, which offered $234,965,000 of series 2015D water financial assistance G.O. bonds. That offering was upsized from $222,475,000.

The bonds (Aaa/AAA/AAA) were sold through Jefferies & Co.

The bonds are due 2021 to 2037 with term bonds due in 2040 and 2045. The serial coupons range from 2.5% to 5% with yields from 1.43% to 3.37%. The 2040 bonds have a 5% coupon and priced at 114.875 to yield 3.17%, and the 2045 bonds have a 4% coupon and priced at 102.781 to yield 3.65%.

Proceeds will be used to finance water assistance projects.

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