Municipal yields turn around after a slump; Minnesota to hit market with $470.2 million sale

By Sheri Kasprzak

New York, July 26 - Municipals finally gained some ground on Friday, thanks to strong secondary action, market insiders said.

"Trading is really strong," said a trader early in the session. "There are a few factors pushing us. Supply pressure has been alleviated for the week, and we're cheap compared to Treasuries."

Supply pressure is expected to be at a minimum next week, said a market source, with $5 billion in new offerings set to hit the market.

Heading up that new-issue action is a $1,107,865,907.50 sale of series 2013A turnpike revenue bonds from the State of Ohio. Those bonds will be offered through Citigroup Global Markets Inc.

The deal includes $73.78 million of series 2013A bonds (Aa3/AA-/AA) and $1,034,085,907.50 of series 2013A junior-lien bonds (A1/A+/A+).

Proceeds from the deal will be used to finance capital improvements to the turnpike system.

Minnesota to sell G.O.s

Looking ahead, the State of Minnesota plans to price $470,205,000 of series 2013 general obligation state bonds on Aug. 5.

The offering includes $265,205,000 of series 2013A various purpose bonds, $200 million of series 2013B trunk highway bonds and $5 million of series 2013C taxable state bonds.

The bonds will be sold competitively.

Proceeds will be used to finance capital projects and state highway construction and to develop the state's agricultural resources by financing Rural Finance Authority programs.

S&P lists highest-yielding issues

In light of Detroit's recent bankruptcy filing, Standard & Poor's listed the highest-yielding bond issues in its S&P Municipal Bond index on Friday.

Those municipalities include Maverick County, Texas; Scranton, Pa.; Central Falls, R.I.; Northern Mariana Islands; Woonsocket, R.I.; Bellwood, Ill.; Riverdale, Ill.; and Harvey, Ill.

Meanwhile, the average yield-to-worst for investment-grade municipals is 3.12%, according to the S&P National AMT-Free Municipal Bond index. Yields on bonds from these issuers range from 7% to over 9.25%, said the S&P report.

"Investment-grade municipal bonds tracked in the S&P National AMT-Free Municipal Bond index saw yields rise by 38 basis points this month, driving bond prices down and recording a negative monthly return of 1.54%," wrote J.R. Rieger, vice president of fixed-income indexes with Dow Jones - S&P Indices.

"By comparison, bonds tracked in the S&P U.S. Issued Investment Grade Corporate Bond index have seen yields come down by 6 bps, holding returns in positive territory."

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