Municipals seen off in spots along with Treasuries; Illinois brings $500 million G.O. bonds

By Sheri Kasprzak

New York, March 13 - Despite the fact that most of the new offerings priced during the session were well-received, municipals were slightly weaker on Tuesday following softer Treasuries, market insiders reported.

Offerings undertaking retail order periods and final pricings on Tuesday were pricing well, said one trader.

"I really think we're off because of Treasuries," said the trader reached during the afternoon.

"Around the middle of the curve, we might be off a basis point or so. There might be some slight weakness elsewhere. Pricing seems to be going well. There's still a decent among of demand, and things are coming in at good levels."

Illinois sells $500 million

Leading the day's primary action, the State of Illinois sold $500 million of series 2012 general obligation bonds, said a pricing sheet.

The bonds were sold through Ramirez & Co. Inc. and US Bancorp Investments Inc.

The bonds are due 2013 to 2037 with 4% to 5% coupons. The full pricing details were not immediately available by press time on Tuesday.

According to market insiders, the offering was well-priced, drawing in plenty of interest from investors.

"I think the last time they came to market, they managed to do extremely well, and this may have brought some investors onboard for this pricing," said one sellside source on the deal.

"Illinois is one of those names that can be polarizing sometimes."

Even so, yields on the state's offering conducted back in January ranged from 0.75% to 5.76% yields with coupons from 0.75% to 5.55%.

Proceeds from Tuesday's sale will be used to finance capital projects, such as transportation, school and state facility projects.

Four states recovering

In the broader market, Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC, said that four of the states most damaged from the collapse of the real estate bubble are also leading the recent employment expansion. Arizona, California, Florida and Nevada were all impacted the most from the collapse, but have boosted their employment numbers in recent months.

Kozlik said those four states added more than 200,000 jobs from August through December, making up 28% of the increase of U.S. employment for that period, according to data released by the Labor Department.

In other real estate news, mortgage delinquencies in the U.S. housing finance agencies' whole loan mortgage portfolios continue to rise in the third quarter of 2011, said Kozlik, quoting a report from Standard & Poor's. This, however, will not likely impact HFA bond ratings, Kozlik noted.

Foreclosures remained low in both HFA and state portfolios, but they have increased significantly for each type of loan since 2006, Kozlik said.

"S&P anticipates that weaker mortgage loan performance will continue in the immediate term, but that additional deterioration will be moderate," he wrote.

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