Municipals improve ahead of $6 billion of supply; Fitch keeps PREPA on negative watch

By Sheri Kasprzak

New York, Sept. 15 – Municipal prices climbed on Monday following improved Treasuries and ahead of a busier-than-average new-issue calendar, market insiders said.

Yields were seen lower by 1 basis point to 2 bps across the curve, following closely with Treasuries. The bond market awaits a variety of news throughout the week, including the Federal Open Market Committee’s September meeting. Also to be seen is how Scotland’s vote for independence impacts Treasuries and municipals.

During the session, the 10-year Treasury note yield fell by 2 bps to end at 2.60%, and the five-year note yield fell by 3 bps to 1.80%. The 30-year bond yield fell by 1 bp to 3.34%.

Fitch keeps PREPA at negative

Moving to ratings news, Fitch Ratings maintained its negative rating watch on $8.7 billion of Puerto Rico Electric Power Authority revenue bonds, which are rated CC.

“Maintenance of the current rating watch negative reflects Fitch’s view that a restructuring of PREPA’s debt obligations remains probably despite recent forbearance agreements between PREPA and certain of its creditors (including bondholders),” said a Fitch statement released Monday.

“The agreements, signed on Aug. 14, 2014, provide only temporary relief related to the scheduled maturity of PREPA’s bank lines of credit, and minimal comfort that long-term financial compliance is sustainable.”

Additionally, Fitch noted that cash flow concerns remain for the authority, and the rating agency is concerned that the authority’s net cash receipts and existing funds on hand are insufficient to meet long-term working capital, debt service and other requirements.

Greenville health bonds trade

Moving to secondary market action, the Greenville Health System of South Carolina’s series 2014B hospital revenue bonds were seen trading actively during the session.

The 4% 2044s were seen trading between 3.922% and 4.152%, ending at 3.922%. The bonds were priced on Thursday at a 4.1% yield. The 3.625% 2032s traded between 3.644% and 3.746% during the day.

The bonds (A1/AA-/AA-) were sold through Barclays and Wells Fargo Securities LLC.

The bonds are due 2024 to 2034 with term bonds due in 2039 and 2044. The serial coupons range from 3.625% to 5%. The 2039 bonds have a 4% coupon priced at 98.914 and a 5% coupon priced at 109.916. The 2044 bonds have a 4% coupon priced at 98.291.

Proceeds will be used to construct, equip, acquire and improve health facilities operated by the system.

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