Municipal yields continue to climb; Illinois' $1.3 billion G.O. offering tops week's offerings

By Sheri Kasprzak

New York, June 24 - Municipal yields were off on Monday with 10-year yields taking the brunt of the beating after bids-wanted exceeded $1 billion, market insiders reported.

Ten-year yields were up as much as 10 basis points by the afternoon, said a trader, but this was relatively small compared to the 20-bps hit both Thursday and Friday of last week.

"It's not as bad, but we're not exactly dancing with joy over here," a trader said.

The beating the market took last week could have an impact on this week's market action, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC. In fact, by the close, it was rumored that some offerings were already being pulled from the calendar.

"We expected about $7 billion of primary market supply during the week of June 17, but only about $4 billion eventually came to market," he wrote Monday.

Last week, AAA Municipal Market Data yields jumped by 40 bps in the 10-year portion of the curve and 46 bps to 3.96% in the 30-year portion of the curve, Kozlik reported.

"Municipal-to-Treasury (or M/T) ratios remain very attractive at 104% for the 10-year and 110% for the 30-year," he wrote.

The week ahead could be negatively impacted by the previous week's yield jump. About $10 billion of supply is expected.

"But we will see where yields decide to go as that factor is what is going to mainly drive activity this week," Kozlik said.

"If yields continue to rise at similar levels as they did last week, there is a very good chance issues could be again pulled from the queue."

Illinois leads offerings

Topping this week's new-issue action is the State of Illinois' $1.3 billion offering of series of June 2013 general obligation bonds.

The bonds (A3/A-/AA-) will be sold through lead managers Wells Fargo Securities LLC, Siebert Brandford Shank & Co. LLC and Stifel, Nicolaus & Co. Inc.

Proceeds from the deal will be used to finance capital development, school construction and transportation projects.

Tobacco Settlement deal set

Also ahead during the week, the Tobacco Settlement Financing Corp. of Louisiana is on board to price $638.03 million of series 2013A tobacco settlement asset-backed refunding bonds.

Citigroup Global Markets Inc. and Jefferies & Co. are leading the negotiated sale.

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

"The state pledged 60% of its share of the [tobacco settlement revenues] due to the state under the [Master Settlement Agreement] after the transaction's sale date," said a report from Standard & Poor's.

"The pledged TSR does not include unencumbered revenues (tobacco settlement revenues due to the state for any period before Jan. 1, 2013) or residual revenues. The corporation's claim to the pledged TSRs is on parity with the claim of the state to ownership of the remaining 40% of all amounts that must be paid to the state under the MSA."

The corporation intends to use the proceeds to refund all of its outstanding series 2001B asset-backed tobacco settlement bonds.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.