Municipals close session weaker as major deals price; California cuts bonds to $685.33 million

By Sheri Kasprzak

New York, April 21 – Municipals rounded out a busy session on a weak note, market insiders said, as several significant deals hit the market.

Yields were seen higher by 1 to 2 basis points across the curve with long bonds still taking the brunt of the weakness, a trader said in the afternoon.

Meanwhile, new-issue action was brisk with some of the week’s largest deals pricing.

Two of the larger deals of the day – a G.O. offering from the State of California and a refunding deal from the Phoenix Civic Improvement Corp. – were downsized.

California cuts G.O.s

California had been on tap to bring the week’s largest deal – a $1,101,555,000 offering of G.O. bonds in two tranches – but the deal came in at a comparatively modest $685.33 million.

The deal included $105,355,000 of series 2015 taxable G.O.s and $579,975,000 of series 2015 tax-exempt G.O. refunding bonds.

The 2015 taxables are due April 1, 2020 and have a 1.8% coupon priced at 100.564 to yield 1.68%.

The 2015 tax-exempt bonds are due 2015 and 2026 to 2035 with 1% to 5% coupons and 0.1% to 3.5% yields.

Proceeds will be used to finance state capital projects and refund existing G.O. debt.

Phoenix brings refunding bonds

Another major deal came from Phoenix Civic Improvement of Arizona, which sold $380,205,000 of series 2015 excise tax revenue refunding bonds. The offering was downsized from $391.34 million.

The bonds (Aa3/AA+/) were sold through senior manager Wells Fargo Securities LLC.

The deal included $319,305,000 of series 2015A refunding bonds and $60.9 million of series 2015B taxable refunding bonds.

The 2015A bonds are due 2017 to 2037 with a term bond due in 2041. The serial coupons range from 3% to 5%. The 2041 bonds have a 5% coupon priced at 115.005.

The 2015B bonds are due 2016 to 2030 with a term bond due in 2035. The serial coupons range from 0.41% to 3.702%, all priced at par. The 2035 bonds have a 3.992% coupon priced at par.

Proceeds will be used to refund existing G.O. debt.

1Q upgrades outnumber downgrades

Elsewhere during the day, Fitch Ratings reported that upgrades outnumbered downgrades for the first quarter, the fourth straight quarter this has occurred.

Fitch downgraded 20 credits, representing 2.4% of all rating actions and $43.9 billion of par value, said the report from Fitch analysts Richard Raphael, Parker Montgomery and Christina Lin.

The number of downgrades was less than upgrades by a 0.6:1 ratio, up from a 0.4:1 ratio in the fourth quarter of 2014.

The vast majority of ratings actions were affirmations at 88%.

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