Munis end little moved despite Treasury rally; Commonwealth Transportation brings $600 million

By Sheri Kasprzak

New York, May 31 - Municipals ended Thursday on a flat to slightly firmer note, but yields continued to underperform the Treasuries market, said market insiders.

For two sessions in row, Treasuries rallied and, while municipals did firm as well, they underperformed Treasuries.

"We're really having a hard time with yields at the present levels," one trader noted.

"Retail has no interest with yields so low. Basically, yields are coasting along with Treasuries, but we're having a hard time making any real headway alone."

It was a similar story on Wednesday, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"In 10 years, the MMD AAA benchmark yield fell 3 basis points [Wednesday] to 1.8%, compared to the 12 basis point drop of the like maturity Treasury yields, bringing the [muni-to-Treasury] ratio to 111%, the highest level in six months," Schankel said.

"The long end of the curve saw similar action, as the ratio in 30 years hit 114%. The numbers are clear, but the cause of increasing ratios is less so. Although jammed into a holiday-shortened week, the week's calendar is a manageable amount. Continued concerns about Europe, along with a weak pending home sales number, explains strong Treasuries, but not lagging munis."

Commonwealth bonds price

Leading primary action Thursday, the Commonwealth Transportation Board of Virginia sold $600 million of series 2012 transportation capital projects revenue bonds, said a pricing sheet.

The bonds (//AA+) were sold on a competitive basis with Citigroup Global Markets Inc. winning the bid with a 3.36% true interest cost, said Tamara Rollison, spokeswoman for the Virginia Department of Transportation.

The bonds are due 2013 to 2034 with a term bond due in 2037. The serial coupons range from 3% to 5%. The 2037 bonds have a 4% coupon and priced at 102.387.

Proceeds will be used to finance transportation capital projects.

According to Rollison, the proceeds will be used to fund projects included in the board's six-year improvement program.

Michigan Finance preps deal

Looking ahead, the Michigan Finance Authority announced Thursday that it will sell $2,968,595,000 of series 2012 unemployment obligation assessment revenue bonds in three tranches.

The bonds will be sold through Citigroup Global Markets Inc. and Bank of America Merrill Lynch.

Proceeds from the sale will refund existing debt and be deposited into the authority's liquidity reserve fund.

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