Municipals end flat to weaker as market readies for $5.4 billion supply; Puerto Rico deal set

By Sheri Kasprzak

New York, Aug. 14 – Municipals rounded out the week unchanged to slightly weaker as the market prepared for a fairly light new-issue calendar.

Yields on top-rated munis were flat to higher by about 1 basis point, falling mostly in line with mixed Treasuries. Yields on short Treasuries rose by 1 bp to 3 bps on positive Producer Price Index data.

Elsewhere in the market, the municipals/Treasuries ratio is trading around 113% at the 30-year mark and trending to the highest levels since the end of May, said a market source Friday afternoon.

Trading volume remains on the low side. On Thursday, the MSRB’s trading volume measured $7.4 billion, about 22% below the daily average for the past three months.

In the week ahead, about $5.4 billion of new issues will price, down somewhat from recent weeks.

Puerto Rico Aqueduct eyes deal

Heading up the week’s action, the Puerto Rico Aqueduct and Sewer Authority is on tap to sell $750 million of series 2015A senior lien revenue bonds (Caa3) through BofA Merrill Lynch and J.P. Morgan Securities LLC. Pricing is scheduled for Tuesday.

The offering came as a surprise given the fact that the Commonwealth of Puerto Rico is facing a financial crisis and recently defaulted on Public Financing Corp. debt. The commonwealth and all of its entities were hit with an across-the-board downgrade from Fitch Ratings.

Still, Puerto Rico’s Government Development Bank said in a recent statement that the aqueduct and sewer authority is not subject to debt restructuring.

The authority plans to use the proceeds from the deal to finance capital projects under its five-year capital improvement plan.

Portland preps bonds

Another sewer deal this week comes from the City of Portland, Ore., which is ready to price $403,915,000 of sewer revenue refunding bonds Tuesday.

The bonds will be sold competitively.

The offering includes $341,525,000 of series 2015A first-lien bonds (Aa2/AA/) due 2016 to 2031 and $62.39 million of series 2015B second-lien bonds (Aa3/AA-/) due 2016 to 2031.

Proceeds will be used to refund existing sewer debt.

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