Municipal bonds hit bump after positive jobs report; tobacco bonds save Louisiana $83 million

By Sheri Kasprzak

New York, July 5 - Municipal yields were off on Friday, thrown off by a Treasury sell-off early in the day, market sources said. Treasuries were negatively impacted by a better-than-expected jobs report.

"Given the slow session, we're floating along with Treasuries," one trader said.

"I think everyone is shorthanded today with the holiday, and in general, we're not seeing a lot of activity today to help us."

Tobacco bonds save millions

Before the July 4 holiday, the Tobacco Settlement Financing Corp. of Louisiana hit the market with $659,745,000 of series 2013A tobacco settlement asset-backed refunding bonds.

The timing of the deal was intended to avoid the potential for a run-up in yields before the nonfarm payroll data release, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

"The [Louisiana] tobacco issue was a refunding of prior bonds that allowed the state to realize about $83 million of savings, less than the $143 million expected a few weeks ago, but still a healthy amount," Kozlik said.

The issue is "among one of the highest-rated tobacco financings with bonds maturing from 2016 to 2023 receiving an A rating [from Fitch Ratings], 2024 to 2033 an A- [from Fitch] and the 2035 term bond posting a BBB+ rating [from Fitch]," he said.

The bonds were sold through Citigroup Global Markets Inc. and Jefferies & Co.

The bonds are due 2016 to 2033 with a term bond due in 2035. The serial coupons range from 5% to 5.5% with 1.21% to 4.98% yields. The 2035 bonds have 5.25% coupon and priced at par.

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

Utah deal leads week's supply

Looking to offerings for the week ahead, the State of Utah is set to price $216,975,000 of series 2013 general obligation bonds (Aaa/AAA/AAA) on Thursday.

The bonds will be offered competitively and are due 2014 to 2028.

Proceeds from the sale will be used to finance highway projects throughout the state.

In other competitive offerings, the Miami-Dade County School District is scheduled to bring $182.7 million of series 2013 G.O. school bonds (Aa3/A+/) on Tuesday.

The bonds are due 2015 to 2043.

Proceeds will be used to finance capital improvements within the district.

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