Municipals firmer with improved Treasuries; Pinellas school offering tops primary calendar

By Sheri Kasprzak

New York, Sept. 20 - Municipals were firmer to close out the week as Treasuries improved, market sources said.

The tone was firmer with yields improved somewhat, said a trader late in the session.

The 10-year municipal yield declined about 1 basis point during the session, even as the 10-year Treasury yield shrank by 1.5 bps.

Heading up the light new-issue calendar for the week ahead, the Pinellas County School District of Florida plans to price $83 million of series 2013 tax anticipation notes (MIG1) competitively.

The bonds, which are due June 30, 2014, are being sold to finance cash shortfalls for the district ahead of the collection of ad valorem taxes.

Puerto Rico, tobacco in focus

Moving to indices, the municipal market, according to J.R. Rieger, vice president of fixed income indices with S&P Dow Jones Indices, has been weighed down by two anchors - Puerto Rico and tobacco settlement bonds.

The S&P Municipal Bond Puerto Rico index hit a record high Sept. 9 with the yield reaching just over 7%.

"Since that point, the yields have improved by 49 bps to end last night [Sept. 19] at a 6.51%," Rieger wrote Friday.

"As of last night, the yield for Puerto Rico bonds is more than double those of the average seen in the S&P National AMT-Free Municipal Bond index. This has been the worst quarter in the index history with a negative 12.68% return and so far the worst-performing year with a year-to-date total return of negative 14.6%."

Even so, tobacco bonds have had a good month, helping offset serious losses for the quarter, Rieger noted.

The S&P Municipal Bond Tobacco index recorded a positive 5.39% during September but a quarterly loss of 4.37%.

"The index has seen a year-to-date return of negative 7.66%, helping to hold back the returns of the municipal high-yield bond market," Rieger wrote.

New tobacco deal ahead

With the decent month tobacco bonds have had, Washington state's Tobacco Settlement Authority announced plans to price $344.39 million of series 2013 tobacco settlement revenue refunding bonds.

The bonds will be offered through Citigroup Global Markets Inc.

The bonds are due 2014 to 2033 with a term bond due in 2036.

Proceeds will be used to current refund the authority's series 2002 tobacco settlement revenue bonds.

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