Municipals weaken along with Treasuries on economic data; Wisconsin preps $428.74 million sale

By Sheri Kasprzak

New York, Jan. 5 - Municipal yields were up slightly on Wednesday in line with Treasuries that were weaker on higher-than-expected employment numbers, market insiders reported.

"We're basically following Treasuries," said one trader reached during the session.

"It's just data. We're not really too concerned about it. I suspect things will improve tomorrow."

Treasuries hit a bump on Wednesday on the release of the ADP Employer Services' report that private employers added 297,000 jobs in December, far above the forecast 100,000. Stocks rallied, shoving the 30-year Treasury bond up 13 basis points and the 10-year note up 14 bps.

Not all lost amid downgrades

Meanwhile, one sellsider reached Wednesday said he feels that although downgrades are abounding in the muni market, not all hope is lost.

"It's really hard to tell what's being downgraded because it was rated too highly to begin with and which credits are truly deteriorating," he said.

"It's true that some credits probably are weakening, but there are a lot of issuers out there that are making the right cuts, raising revenues and pulling themselves back up. It's going to be a tough year for everyone, and I'm sure some [muni] investors are going to shy away from the market, but it really is a great place to be for those looking for yield. My hope is that retail doesn't turn tail."

In his daily report, Alan Schankel, managing director with Janney Montgomery Scott LLC, pointed out a few upgrades, including two upgrades out of Louisiana by Standard & Poor's. He noted that St. Charles Parish's sales tax revenue bonds were upgraded to AA- from A+ and the Calcasieu Parish Sales Tax District No. 3's debt was lifted to A from A-.

Wisconsin preps G.O. bonds

In the coming week, the State of Wisconsin is slated to come to market with $428.74 million of series 2011A general obligation bonds, said a notice of sale.

The bonds will be sold competitively on Jan. 12 and are due 2012 to 2031.

Proceeds will be used to construct, develop, extend, enlarge or improve land, water, property, highways, buildings, equipment or facilities for public purposes.

Upland sale set

Also coming up during the week of Jan. 10, the City of Upland, Calif., is poised to sell $125 million of series 2011 certificates of participation for San Antonio Community Hospital.

The offering was originally set to price in late 2010, but crumbling market conditions forced the issuer to postpone the sale and lower it from $135 million.

Bank of America Merrill Lynch and Morgan Stanley & Co. Inc. are the senior managers for the COPs (A3/A/).

Proceeds will be used to reimburse the hospital for the construction, equipment, acquisition and renovation of hospital facilities as well as prepay existing debt.

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