Municipals end flat to weaker in spots; new issue supply dips to $5 billion ahead of holidays

By Sheri Kasprzak

New York, Dec. 15 – Municipals closed a slow session mostly flat to slightly weaker on Monday, said traders.

Amid light trading and very little primary action, yields were mostly flat, said a trader, but some spotty weakness crept in.

Some names, including recently priced Texas Transportation Commission bonds, were seen cheaper, said a trader in the afternoon.

Meanwhile, Treasuries were mixed with the 30-year bond yield climbing by 1 basis point but the five-year note yield falling by 5 bps. The 10-year benchmark yield fell by 2 bps.

Looking to the week ahead, new issue activity will fall to about $5 billion after two weeks of supply above $10 billion.

Dasny to sell $518.29 million

Heading up the week’s supply is a $518,285,000 offering of state personal income tax revenue bonds from the Dormitory Authority of the State of New York.

The offering includes $436.41 million of series 2014E tax-exempt bonds, $24,585,000 of series 2014F tax-exempt bonds and $57.29 million of series 2014G taxable bonds.

The bonds (Aa1/AAA/) will be sold on Tuesday through senior managers BofA Merrill Lynch, RBC Capital Markets LLC and Siebert Brandford Shank & Co. LLC.

Proceeds will finance the construction of capital projects for the state’s Office of Mental Health, as well as to refund existing bonds issued for the office.

Oil price decline hits states

Declines in oil-related revenues could negatively impact oil-producing states as oil prices continue to drop, said analysts from Fitch Ratings in a report released Monday.

Alaska, Louisiana, New Mexico and North Dakota are among the oil-producing states that could be impacted by falling oil prices.

“Although the impact varies widely, budgets for all the major oil-producing states could become less predictable in the near term if volatility in the oil markets continues,” wrote Marcy Block and Rob Rowan, senior directors, and analyst Christina Lin.

“The extent of the direct near-term fiscal impact will be dictated by the actual price’s deviation from the state’s forecast and the amount that oil production taxes contribute to the operating budget. Louisiana’s oil production and related taxes and fees made up 14% of that state’s 2013 general fund budget. Alaska’s were approximately 92%. More broadly, the decline in gasoline and heating fuels will drive increases in consumer purchases and therefore support broad-based state tax revenues across the country.”

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