Municipals improve along with Treasuries on weaker manufacturing; Massachusetts prices bonds

By Sheri Kasprzak

New York, Dec. 1 – Municipals were stronger on the day Tuesday after Treasuries got a boost from weak manufacturing data, market sources said.

Yields on top-rated munis were lower by 3 basis points to 5 bps.

Over in Treasuries, the ISM and Markit manufacturing data sent yields falling. The 30-year bond yield fell by 7 bps to close at 2.91%, the 10-year note yield fell by 6 bps to 2.15%, the five-year note yield fell by 6 bps to 1.59%, and the two-year note yield fell by 3 bps to 0.91%.

Puerto Rico avoids default

It was a scary time Tuesday morning when default loomed for Puerto Rico. The island commonwealth announced earlier this week that it might not be able to make a $354 million debt payment.

Puerto Rico Gov. Alejandro Garcia Padilla said early in the week that the island was out of cash and would rely upon money intended for debt repayment to operate.

The commonwealth did make the payment, but it may not be out of the woods yet. There are other debt payments due between now and the beginning of 2016.

Puerto Rico general obligation bonds were heavily traded Tuesday.

The 8% 2035s closed out the day at an 11.168% yield to maturity after trading between 11.053% and 11.431%.

Massachusetts brings bonds

Leading the day’s primary activity, the Commonwealth of Massachusetts offered $550 million of series 2015 consolidated loan G.O. bonds.

The bonds (Aa1//AA+) were sold competitively.

The deal included $150 million of series 2015D bonds and $400 million of series 2015E bonds, said a term sheet.

The 2015D bonds are due 2026 to 2035 with 3% to 5% coupons and yields from 2.25% to 3.36%.

The 2015E bonds are due 2036 to 2045 with 3.25% to 4% coupons and 3.27% to 3.50% yields.

Proceeds will be used to finance capital improvements as part of the state’s five-year capital improvement plan.

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