Municipal yields edge higher as Treasuries sell off; less than $5 billion of new supply ahead

By Sheri Kasprzak

New York, Feb. 13 – Municipals slid somewhat on Friday, following but outperforming Treasuries, market insiders said.

Yields were higher by 1 to 2 basis points across the curve, a trader said in the afternoon. Meanwhile, a selloff fueled by talks between Greece and its European creditors sent the 30-year bond yield up 5 bps and the 10-year yield up 3 bps.

Looking to the week ahead, less than $5 billion of new issues are expected as the market takes a break for the Presidents Day holiday on Monday.

Pensions report higher values

Elsewhere in the market Friday, Fitch Ratings analysts reported that most public pension systems have materially higher asset values under the new Government Accounting Standards Board standards, reflecting immediate recognitions of several years of strong market gains not yet incorporated under the practices followed by previous GASB standards.

“In an accident of timing, the transition to GASB 67 is taking place at a very favorable moment in the economic cycle for reporting asset valuations,” Douglas Offerman, senior director, said in a statement.

The higher ratios of assets to liabilities, the analysts said, should be viewed cautiously.

“The new depletion date and blended discount rate reported by some systems under GASB 67 highlight existing weak practices – notably an unwillingness to consistently fund an actuarially calculated contribution,” Offerman and managing director Amy Laskey said in the report.

New Mexico deal ahead

Leading Tuesday’s competitive offerings, the State of New Mexico is slated to price $150 million of series 2015 capital projects general obligation bonds.

The bonds are due 2016 to 2025, and proceeds from the sale will be used to construct, acquire and improve senior centers and to make library acquisitions and improvements to higher education, special school and tribal school facilities.

U of Maryland bonds set

On Wednesday, the University System of Maryland is on tap to price $95,075,000 of series 2015A tax-exempt auxiliary facility and tuition revenue refunding bonds.

The bonds (Aa1/AA+/AA+) will be sold competitively and are due 2016 to 2028.

Proceeds will be used to refund the system’s series 2005A and 2008A auxiliary facility and tuition revenue bonds.

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