Municipals close firmer despite weaker Treasuries market; Port Authority brings $1 billion

By Sheri Kasprzak

New York, Jan. 22 - Municipals ended the session flat to firmer in spots on Wednesday despite some weakness in the Treasuries market, insiders reported.

Primary activity was the major focus of the day as secondary took a break due to the snowstorm, a trader said during the session.

"Since yesterday, the trading desks have been very quiet, so most of what's happening today is in primary," he said.

"Yields are getting firmer, particularly out long."

Treasuries, on the other hand, were weaker, shoved down by some international jobs data. The 10-year Treasury note yield rose by 3.5 basis points to end at 2.856%, and the 30-year bond yield rose by 1.5 bps to 3.754%. The five-year note yield climbed by 5 bps to 1.689%.

Puerto Rico paper firms

Looking to trading action, Puerto Rico names continue to trader firmer, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"For example, a block of G.O. 5% due 2041 traded at 8.17% on Tuesday, well below the 8.78% and 9% block trades from earlier this year," he said.

Reportedly, a group led by Morgan Stanley is working on a proposal to loan the commonwealth as much as $2 billion with yields as high as 10%, Schankel said.

"This is not a PR government initiative, but could potentially serve as a backstop if the PR Treasury is unable to market a third-lien Cofina issue as planned before the end of February. Based on recent trading levels and the strong demand for high-yield municipals in recent weeks, our sense is that there is demand for a Cofina deal at yields well below 10%."

PANYNJ brings debt

Heading up the day's primary activity, the Port Authority of New York and New Jersey came to market with the week's largest deal, $1 billion of series 181-182 consolidated bonds.

The bonds (Aa3/AA-/AA-) were sold through senior managers BofA Merrill Lynch, Barclays, Citigroup Global Markets Inc. and RBC Capital Markets LLC.

The deal included $500 million of series 181 taxable consolidated bonds and $500 million of series 182 taxable consolidated bonds, said a pricing sheet.

The series 181 bonds are due Aug. 1, 2046, bear interest at 4.96% and priced at par.

The series 182 bonds are due Aug. 1, 2046, bear interest at 5.31% and priced at par.

Proceeds will be used to redevelop the World Trade Center site in Lower Manhattan.

Thruway bonds price

In other New York bond offerings, the New York State Thruway Authority hit the market with $676,475,000 of series J general revenue bonds. The offering was upsized from $360.61 million.

The bonds were sold through lead managers Barclays and Siebert Brandford Shank & Co. LLC.

The bonds are due 2015 to 2036 with term bonds due in 2041 and 2044. The serial coupons range from 2% to 5%. The 2041 bonds have a 5% coupon and priced at 104.199, and the 2044 bonds have a 4.625% coupon and priced at 98.797.

During the retail order period on Tuesday, the 30-year maturity was structured as 4.625% to yield 4.70%, said a market insider Wednesday before institutional pricing results were released.

Proceeds will be used to fund a portion of the authority's multiyear capital program.

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