Municipals little changed, mixed along with Treasuries; investment-grade index up 2.34%

By Sheri Kasprzak

New York, Feb. 14 - Municipals closed out the week little changed with a mixed tone, market insiders said, as Treasuries responded to inconclusive economic data.

Munis were only off a touch with long bonds closing a touch firmer, traders reported.

Treasuries, meanwhile, slipped as the five-year note yield rose by 2 basis points to close at 1.523% and the 10-year note yield climbed by half a basis point at 2.743%. The 30-year bond, however, fell by half a basis point to end at 3.695%.

Investment-grade index up

During the session, the S&P Dow Jones Indices noted that its investment-grade municipals, as tracked in the S&P National AMT-Free Municipal Bond index, saw a positive year-to-date return of 2.34%.

High-yield munis, as tracked by the S&P Municipal Bond High Yield index, registered a 3.57% return year to date.

Puerto Rico debt, after getting downgraded to below investment grade by all three ratings agencies, has cheapened. The weighted average yield of bonds in the S&P Municipal Bond Puerto Rico index rose to 7.52%, the cheapest levels since the index began in December 2000.

"That index tracks both general obligation and revenue bonds issued by Puerto Rico," said the S&PDJI report.

"The yield of bonds in the index has come back to a 7.47%, still 491 bps cheaper than investment-grade bonds tracked in the S&P National AMT-Free Municipal Bond index and 93 bps cheaper than the average yield of bonds in the S&P Municipal Bond High Yield index. Uncertainty continues to grow as all three ratings agencies have downgraded Puerto Rico bonds to below investment grade this month as it prepares to bring a $3.5 billion bond issue to market."

Buncombe brings debt

Moving to primary action, Buncombe County, N.C., hit the market with $180,315,000 of series 2014 limited obligation bonds.

The deal included $151.59 million of series 2014A tax-exempt bonds (Aa2/AA+/) and $28,725,000 of series 2014B taxable bonds, according to a pricing sheet.

The 2014A bonds are due 2015 to 2034 with a term bond due in 2037. The serial coupons range from 3% to 5% with 0.35% to 3.92% yields. The 2037 bonds have a 4% coupon priced at 97.333 to yield 4.18%.

The 2014B bonds are due 2015 to 2034 with 0.53% to 5.1% coupons, all priced at par.

Proceeds will be used to refinance the county's obligations as part of a 2006 contract and to purchase bonds.

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