Yields remain firm at week's close ahead of $7 billion calendar; Illinois to sell $1.5 billion

By Sheri Kasprzak

New York, July 13 - Municipals were firmer yet again on Friday even as new issue activity and secondary action tapered off, traders reported.

Yields were improved by 2 basis points to 3 bps across the yield curve, and the most improvement was seen outside of 10 years.

"The bulk of the week's activity is over, so there's not a lot to really shove us, but we seem to be riding on the tone of the rest of the week," a trader said.

Looking to the week ahead, the market is expected to see about $7 billion of new issues, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

Illinois headlines new deals

Leading the new offerings, the State of Illinois plans to hit the market with $1,493,020,000 of series 2012 unemployment insurance fund building receipts revenue bonds (/AA/AA+) with J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Loop Capital Markets LLC and Bank of America Merrill Lynch as the senior managers.

The offering includes $777.88 million of series 2012A bonds, which are due 2013 to 2017, $542,735,000 of series 2012B bonds, which are due 2017 to 2020, and $172,405,000 of series 2012C bonds, which are due June 15, 2021.

Proceeds will be used to repay advances on the state's unemployment trust fund within the federal unemployment trust fund and to pay state unemployment benefits.

Scranton gets lifeline

In other municipals news, the City of Scranton, Pa., received a $2 million interest-free loan and a $250 million grant from the state government, assuming the mayor and city council can agree on a revised rescue plan by Aug. 1, said Schankel.

"The city, which faces a $16 million shortfall in its $85 million budget, has been unable to borrow the needed funds because of disagreement in city leadership and lack of an updated recovery plan," Schankel wrote Friday.

"City unions are taking the mayor to court after employees were paid at the rate of $7.25 an hour in their last paychecks. On June 1, the city declined to make a $1 million payment for parking authority debt guaranteed by the city, but two weeks later reversed the direction, thus taking its cash position to critically low levels."

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