Municipals close somewhat firmer despite higher Treasury yields; Energy Northwest brings debt

By Sheri Kasprzak

New York, April 9 - Municipals closed the session a touch firmer, market insiders said, despite the fact that Treasury yields climbed following the release of the Federal Open Market Committee's March meeting minutes.

Yields were better by a basis point or two, a trader said, as the FOMC indicated that it would work to keep rates low.

Even so, the 30-year Treasury bond yield rose by 3 bps to 3.574%, and the 10-year note yield rose by 1 bp to 2.693%.

The primary focus of the March FOMC meeting was possible changes to forward guidance on the federal funds rate.

Energy Northwest sells bonds

Heading up the day's primary activity, Energy Northwest of Washington state came to market with $616.48 million of series 2014 Columbia Generating Station electric revenue and refunding bonds.

The deal included $525,935,000 of series 2014A bonds and $90,545,000 of series 2014B bonds, said a pricing sheet.

The 2014A bonds are due 2016 to 2035 with a term bond due in 2040. The serial coupons range from 3% to 5%. The 2040 bonds have a 5% coupon and priced at 109.831.

The 2014B bonds are due 2015 to 2018 with a term bond due in 2030. The serial coupons range from 0.315% to 1.793% and all priced at par. The 2030 bonds have a 4.052% coupon and priced at par.

The bonds (Aa1/AA-/AA) were sold through J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Goldman Sachs & Co. and BofA Merrill Lynch.

Proceeds will be used to finance capital improvements to the Columbia Generating Station and to refund the corporation's series 2004A, 2004C, 2007A, 2008A, 2009A-B and 2011A revenue bonds.

Chicago pension reform a plus

Moving to ratings agency news, the Chicago pension reform plan approved this week by the Illinois legislature would eliminate the threat of pension insolvency facing two of the city's four plans, but long-term pension stability could still be many years away, said Fitch Ratings senior directors Arlene Bohner and Rob Rowan.

Chicago's combined unfunded liability for all four pension plans totals $19 billion with a funded ratio of 35%.

"Fitch considers pension funding levels below 70% to be weak," the directors wrote Wednesday.

"The proposal seeks to improve two pension systems by trimming future growth of the liability with changes to the cost-of-living adjustments, while providing increased contributions from both employer and employees. The plan redefines the city's annual required contribution to an amount that would be sufficient to produce 90% funding in 40 years, similar to the weak funding standard used by the state's plans prior to its recent pension reform."

The city is rated A- by Fitch.

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