Municipals improve amid solid secondary activity; San Diego County transportation bonds ahead

By Sheri Kasprzak

New York, Aug. 15 – The municipals market closed out another session firmer, helped in part by a Treasuries rally, as the secondary market took off despite the summer session, traders said.

In trading action, more than $50 million of Maryland 2023 general obligation bonds were seen trading 5 basis points through Thursday’s level, a trader reported.

By the end of the day, yields were seen lower on munis across the curve by 3 basis points to 5 bps.

International unrest, particularly in Ukraine, shoved Treasury yields down 3 bps to 7 bps across the curve.

High-yield index returns 9.89%

Elsewhere in municipals, the S&P Municipal Bond High Yield index has returned 9.89% this year to date, moved in part by below investment-grade Puerto Rico G.O. bonds returning 12.04% and the S&P Municipal Bond Tobacco index returning 10.89%.

“The result is the municipal high-yield market has outpaced the corporate junk bond market in 2014 as the S&P U.S. Issued Corporate High Yield Bond index has returned 4.99% year to date,” wrote J.R. Rieger, global head of fixed income at S&P Dow Jones Indices.

Overall, munis have kept pace with the equity market, Rieger said in a report released Friday.

The S&P Municipal Bond index has returned 7.03%, compared with the S&P 500 index’s total return of 7.13%.

“Helping to drive that is the revenue bond sector,” Rieger wrote.

The S&P Municipal Bond Revenue index is up 7.99% while G.O. bonds have returned 6.09% this year to date. G.O. bonds issued by states have lagged the overall market, returning just 5.53%, Rieger noted. Local G.O. bonds have returned 6.73%.

San Diego County deal set

Looking to primary action for the week ahead, volume will be lower than the past couple of weeks, said an insider.

The San Diego County Regional Transportation Commission will offer $350 million of sales tax revenue bonds.

The sales tax bonds (/AAA/AAA) will be sold through senior manager Citigroup Global Markets Inc. and are due 2015 to 2034 with term bonds due in 2039, 2044 and 2048.

Proceeds will be used to finance highway improvements to the Interstate 5, Interstate 15, Interstate 805, State Route 52 and State Route 76 corridors and to retire subordinated commercial paper notes.

U of Colorado deal planned

Coming up on Wednesday, the University of Colorado is expected to sell $303.49 million of series 2014 tax-exempt university enterprise revenue bonds through Stifel, Nicolaus & Co. Inc.

The deal (Aa2//AA+) includes $210.19 million of series 2014A bonds, which are due 2017 to 2046, and $93.3 million of series 2014B-1 refunding bonds, which are due 2015 to 2032.

Proceeds will be used to finance capital improvement projects.

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