Municipals close mostly unchanged as supply dwindles; Orlando brings $236.29 million of bonds

By Sheri Kasprzak

New York, March 28 - Municipals ended the week mostly flat as new issues dried up, said market sources, even as secondary activity picked up.

"There seems to be a good amount of trading," a trader said in the afternoon.

"Not a lot of pressure to move us."

The week ahead is looking to be another slow one for new offerings, according to market insiders.

Orlando sells debt

Amid Friday's light primary action, the City of Orlando, Fla., offered up $236.29 million of series 2014A contract tourist development payments revenue bonds.

The bonds (Aa2//AA+) were sold through BofA Merrill Lynch and Citigroup Global Markets Inc.

The bonds are due 2016 to 2034 with term bonds due in 2039 and 2044, said a pricing sheet. The serial coupons range from 3% to 5.25% with 0.59% to 3.96% yields. The 2039 bonds have a 5% coupon and priced at 107.236 to yield 4.11%, and the 2044 bonds have a 5% coupon and priced at 106.56 to yield 4.19%.

Proceeds will be used to construct, acquire, repair and renovate a stadium and performing arts center in the city.

Five-year yields rise

Elsewhere during the session, J.R. Rieger, global head of fixed income at S&P Dow Jones Indices, reported that yields on five-year non-callable bonds have risen by 29 basis points during the month. The returns on the bonds, tracked by the S&P AMT-Free Municipal Series 2019 index, have eroded by 1.3% for the month to date. Seven-year yields rose by 19 bps, dragging returns down by 1.02% for the month to date.

Investment-grade munis, meanwhile, as tracked by the S&P National AMT-Free Municipal Bond index, have returned 3.40% year to date, modestly outperforming their corporate bond counterparts, which have returned 3.12% year to date.

"Both investment-grade munis and corporate bonds have seen yields rise by 5 bps during the month so far," Rieger said.

Looking to Puerto Rico, volatility remains a factor in that market.

"Prices have been swinging up and down as the market regains its footing following the successful $3.5 billion sale of general obligation bonds," Rieger said.

"The uncertainty the market faces is centered around the question of how much the market can bear if the crossover buyers who bought the majority of the bonds begin to sell their positions in the secondary market."

Puerto Rico G.O. bonds were down over 20% in 2013. For the year to date, the S&P Municipal Bond Puerto Rico General Obligation index is up 12.23% in total return, Rieger noted.

© 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.