Municipals drop again as Treasuries feel pressure from stocks; Washington sells $381.6 million

By Sheri Kasprzak

New York, Feb. 10 – Municipal prices were lower again on Tuesday, shoved down by weaker Treasuries, traders reported. Yields climbed by as much as 7 basis points, underperforming Treasuries.

Treasury yields were also higher, but between 3 and 6 bps.

Meanwhile, a bright spot was seen in the market.

“It’s been difficult to not hear the ‘feel-good’ cheerleading about U.S. economic conditions delivered by many analysts, pundits and even political actors,” wrote Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC, in a note Tuesday.

“Investors will be happy to know there is some truth behind this rhetoric, relatively speaking, that is. ...We still advise investors to consider broad economic forces, especially considering that 2014 GDP [year-over-year] growth of 2.4% is pretty close to our 2015 forecasts. However, we are seeing some reasons to be positive going forward.”

One of those is the fact that the U.S. economy is poised to continue growing in 2015, while several economies abroad are struggling. Interest rates will also be a factor that will impact munis in the coming year, Kozlik noted.

Washington brings debt

Moving to the day’s primary action, the state of Washington hit the market with $381,656,000 of series R-2015 general obligation refunding bonds.

The offering included $147,221,000 of series R-2015F motor vehicle fuel tax G.O. refunding bonds, $101.96 million of series R-2015G various purpose G.O. refunding bonds and $132,475,000 of series R-2015H motor vehicle fuel tax G.O. refunding bonds, according to a pricing sheet.

The bonds (Aa1/AA+/AA+) were sold competitively with BofA Merrill Lynch winning the bid for the bonds. The net interest cost for the R-2015F bonds was 2.82267%, and the NIC for the R-2015G bonds was 2.432482%. The NIC for the R-2015H bonds was 3.23168%.

The R-2015F bonds are due 2015 and 2019 to 2031 with 3% to 5% coupons.

The R-2015G bonds are due 2015 to 2028 with 3% to 5% coupons.

The R-2015H bonds are due 2026 to 2031 with 4% to 5% coupons.

Proceeds will be used to refund outstanding debt.

Nashville and Davidson sell bonds

Also during the session, the Metropolitan Government of Nashville and Davidson County, Tenn., priced $163.71 million of series 2015 general obligation refunding bonds. The offering size was cut from $227,905,000.

The deal included $59.73 million of series 2015A G.O. refunding bonds and $103.98 million of series 2015B taxable refunding bonds.

The 2015A bonds are due 2021 to 2026 with 5% coupons, and the 2015B bonds are due 2015 to 2029 with coupons from 0.3% to 3.493%, all priced at par.

Proceeds will be used to refund the government’s series 2010A, 2010D, 2011 and 2012 G.O. refunding bonds and 2013A G.O. improvement bonds.

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