Munis close firmer in light action; downgrades, Isaac don't rattle munis in Illinois, Louisiana

By Sheri Kasprzak

New York, Aug. 30 - Municipals ended Thursday on a firmer note in sync with Treasuries despite less-than-stellar trading activity.

"We're firmer, but mostly thanks to Treasuries," said a trader. "There's not enough trading to buoy us on our own."

One trader pointed out that in the morning, trades of $500,000 or more totaled about 236.

Isaac doesn't affect debt

Meanwhile, despite Tropical Storm Isaac's onslaught on the State of Louisiana, the state's bones have not been impacted so far, said J.R. Rieger, vice president of fixed income indexes with Standard & Poor's.

"As Hurricane Isaac gets downgraded [to a tropical storm], flooding of low areas in Louisiana remains a concern," Rieger said Thursday.

"However, municipal bonds issued within the State of Louisiana were not impacted and have moved with the general municipal bond market for August. The S&P Municipal Bond Louisiana index has returned 0.25% month-to-date and has shown a year-to-date return of over 6.5%, outperforming the national market by 100 bps. Bonds from Alabama and Florida have also performed in sync with the overall bond market."

Illinois unfazed by downgrade

Despite the fact that S&P dropped the State of Illinois' ratings to A from A+, debt issued by the state and municipalities in the state have held their own and performed in line with the overall market, said Rieger.

On a negative note, Puerto Rico did underperform the overall market in August, losing 0.23% even as other states showed positive returns, Rieger said.

"Yields on Puerto Rico municipal bonds have been moving slightly higher, pushing prices down," he said.

High yield outperforms

In other news, high-yield munis continue to outperform the overall market, Rieger said.

"High-yield municipal bonds continue to outperform, returning over 13.1% year-to-date as credit spreads between investment-grade munis and high-yield munis have narrowed by 89 bps since the year-end 2011," he said.

Dasny deal set

One of the larger offerings announced in recent weeks comes from the Dormitory Authority of the State of New York, which said it will come to market with $238 million of state university dormitory facilities lease revenue bonds. The authority said earlier this summer that it had approved the issue for up to $240 million.

The bonds (Aa2/AA-/) will be sold through Ramirez & Co. Inc. and Jefferies & Co. Inc.

Proceeds will be used to finance the construction of dormitory facilities at various state universities and to refund existing debt.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.