Municipals finally stabilize; several large deals loom, led by $1.3 billion Illinois G.O.s

By Sheri Kasprzak

New York, June 14 - Municipal yields were seen firmer for the first time in several sessions, traders reported, as Treasuries improved and secondary action picked up substantially.

"Trading is very active today," said a trader in the afternoon.

One market source noted about 1,000 block trades for the day, something that doesn't happen frequently at the end of the week.

Trading was particularly active around 10 years with the long end also seeing a boost in action.

It was a welcome sight for many market participants after municipals spent the week struggling.

During the week, municipal/Treasuries ratios jumped above 105% in longer maturities, the highest levels so far this year. Outflows to municipal mutual funds were reportedly $1.6 billion for the week, the second week of outflows exceeding $1 billion.

Volume in the upcoming week is expected to be about $6 billion.

Illinois readies G.O.s

Looking to the large slate of upcoming offerings, the State of Illinois is set to bring to market $1.3 billion of series of June 2013 G.O. bonds, a deal that comes on the heels of a Moody's Investors Service downgrade to A3 from A2.

The bonds (A3//A-) will be sold through lead managers Wells Fargo Securities LLC, Siebert Brandford Shank & Co. LLC and Stifel, Nicolaus & Co. Inc., and proceeds from the bonds will be used to finance capital development, school construction and transportation projects.

Tobacco Settlement bonds ahead

Also coming up, the Tobacco Settlement Financing Corp. of Louisiana announced plans Friday to sell $638.03 million of series 2013A tobacco settlement asset-backed refunding bonds, said a preliminary official statement.

The bonds will be sold on a negotiated basis with Citigroup Global Markets Inc. and Jefferies & Co. as the lead managers.

The bonds are due 2016 to 2033 with a term bond due in 2035.

Proceeds will be used to refund all outstanding series 2001B asset-backed tobacco settlement bonds.

St. Joseph deal planned

Heading up the coming week's offerings, the California Health Facilities Financing Authority is ready to price $763.67 million of series 2013 revenue bonds for the St. Joseph Health System.

The bonds (A1/AA-/AA-) will be sold through sole underwriter Morgan Stanley & Co. LLC.

Proceeds will be used to construct, equip, acquire, renovate and remodel the Hoag Hospital Newport Beach, St. Joseph Hospital, St. Jude Medical Center, St. Mary Medical Center and Santa Rosa Memorial Hospital.

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