Munis weaken as nonfarm payroll numbers lead to Treasury sell-off; two-year yield rises 5 bps

By Sheri Kasprzak

New York, March 6 – Municipals followed but outperformed Treasuries Friday after positive nonfarm payrolls led to a Treasuries sell-off and shoved yields up substantially, market sources said.

Short maturities were the most impacted with the two-year yield rising by 5 basis points to 0.60% and the five-year yield increasing 5 bps to 1.37%. The 30-year yield rose by 3 bps to 3.08%, and the 10-year yield rose by 1 bp to 2.16%.

Meanwhile, the 10-year benchmark Treasury note yield rose by 13 bps to 2.24%, and the 30-year yield rose by 12 bps to 2.83%.

Nonfarm payrolls reportedly rose by 295,000 in February, according to a Bureau of Labor Statistics report. The unemployment rate fell to 5.5%, its lowest level in six years.

U of California leads slate

Looking to the coming week’s new-issue calendar, the University of California will head up another heavy slate of offerings.

The university is scheduled to price $1.66 billion of limited project revenue bonds in two tranches on Thursday.

The bonds (Aa3/AA-/AA-) will be sold through senior managers Barclays and Raymond James/Morgan Keegan.

The university plans to use the proceeds to finance the construction, acquisition, improvement and renovation of university facilities at 10 campuses and to refund debt.

Tobacco Settlement deal set

Another major offering scheduled to price Thursday comes from Rhode Island’s Tobacco Settlement Financing Corp.

The corporation is on deck to price $618.12 million of series 2015 tobacco settlement asset-backed bonds through Citigroup Global Markets Inc. and BofA Merrill Lynch.

The offering will be conducted in two tranches: $330.69 million of series 2015A bonds, which are due 2015 to 2030 with term bonds due in 2035 and 2040, and $287.43 million of series 2015B bonds, which are due 2040, 2045 and 2050.

Proceeds will refund the corporation’s series 2002A bonds.

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