Municipals improve as supply drops to $7.6 billion; ratings actions turn positive, Fitch says

By Sheri Kasprzak

New York, March 16 – Municipal yields were flat to firmer Monday ahead of a more subdued new-issue calendar and the Federal Open Market Committee’s March meeting this week.

The 10-year and five-year yields fell by 3 basis points to 2.18% and 1.41%, respectively.

Meanwhile, Treasuries were also better on the day with yields lower by about 4 bps across the board. The 10-year benchmark Treasury yield fell to 2.09%, and the 30-year bond yield fell to 2.66%.

About $7.6 billion of new offerings are headed to market this week on the heels of last week’s massive $13 billion slate.

Honolulu leads offerings

The City of Honolulu is gearing up to price $878,805,000 of series 2015 general obligation bonds in five tranches this week.

The deal includes $375,675,000 of series 2015A tax-exempt bonds, $212.49 million of series 2015B tax-exempt bonds, $240.6 million of series 2015C tax-exempt bonds, $27.98 million of series 2015D tax-exempt bonds and $22.06 million of series 2015E taxable bonds.

The offering will be conducted through BofA Merrill Lynch and Piper Jaffray & Co.

Proceeds will finance capital improvements for the city, refund the city’s G.O. commercial paper notes and refund series 2005B-E, 2007A, 2009A and 2011A G.O. bonds.

Downgrades trail upgrades

Elsewhere during the day, Fitch Ratings reported that its ratings activity has turned positive for the U.S. public finance arena.

Downgrades trailed upgrades in 2014 by a margin of 0.7 to 1, senior director Charlotte Needham said in a report released Monday. This compares with a 2 to 1 ratio in 2013.

“The share of municipal ratings downgraded and upgraded was relatively low at 3.4% and 4.9% in 2014, respectively, with rating activity volume at similar levels to 2013,” Needham said in the report.

“The overall majority of ratings – 86.9% – remained unchanged year-over-year.

“The tax-supported sector represents the majority (57%) of Fitch public finance security ratings and thus led rating activity with largely even results of 3.9% downgraded versus 4.1% upgraded. Rating activity was generally positive across the other public finance sectors.”

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