Municipals cheapen despite Treasuries rally; Illinois Toll Highway brings $378.72 million debt

By Sheri Kasprzak

New York, Jan. 29 - Municipals closed out the session weaker on Wednesday even as Treasuries rallied, market insiders said, shoved down mostly by bids-wanted in the 10- to 15-year portion of the yield curve.

"We are seeing profit-taking around 10 to 15 years," a trader said.

"In fact, the weakness is really in that part of the curve. We seem to be flying independent of Treasuries today, but that's not all that surprising."

Around 10 to 15 years, yields were weaker by 2 basis points to 3 bps as yields in shorter and longer maturities remained flat to slightly weaker.

Meanwhile, Treasuries improved as the Federal Open Market Committee voted to keep interest rates at their current 0% to 0.25% levels. The 10-year Treasury note yield fell by 7 bps to close at 2.677%. The 30-year bond yield fell by 5.5 bps to 3.618%, and the five-year note yield fell by 5.5 bps to 1.15%.

The Fed also agreed to reduce the pace of monthly bond-buying to $65 billion from $75 billion, marking the fifth year of zero short-term interest rates and the second consecutive meeting that the FOMC has reduced its pace of bond-buying.

Winter to challenge airports

Looking to sector news, airports could be negatively impacted by severe winter weather, said a report released Wednesday by Fitch Ratings.

"Passenger traffic is the lifeblood of airport revenue," wrote Seth Lehman, senior director with Fitch.

"Passenger-generated revenue from terminal concessions, on-airport parking and car rental are most at risk to changing conditions. All together, these revenues can contribute 40% to 60% of total airport operating revenues and quickly impact total non-aeronautical revenue generation. From the expense side, higher costs for snow and ice removal can impact net cash flow as well."

During the 2013-2014 winter, over 40,000 flight have been canceled and 180,000 flight have been delayed, Fitch reported, with much of that disruption seen in the Midwest and Northeast.

Illinois toll bonds price

Heading up Wednesday's primary action, the Illinois State Toll Highway Authority came to market with $378.72 million of series 2014A toll highway senior revenue refunding bonds. The offering was cut from $400 million.

The bonds (/AA-/) were sold through Goldman Sachs & Co. and Jefferies & Co.

The bonds are due 2019 to 2022 with 4.5% to 5% coupons and 1.73% to 2.77% yields, said a pricing sheet.

Proceeds will be used to refund the authority's series 2005A revenue bonds.

New York Water sells debt

Also during the session, the New York City Municipal Water Authority sold $351.24 million of series 2014CC water and sewer system second general resolution revenue bonds.

The bonds were sold through Raymond James/Morgan Keegan.

The bonds are due 2018 and 2019 with term bonds due in 2044 and 2047, said a pricing sheet. The serial bonds have 5% coupons with 0.59% and 0.85% yields. The 2044 bonds have a 4.25% coupon and priced at 97.659 to yield 4.39%, and the 2047 bonds have a 5% coupon and priced at 104.688 to yield 4.43%.

Proceeds will be used to finance capital projects for the authority and repay commercial paper notes.

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