Municipals decline in sympathy with Treasuries after jobless claims; Texas highway bonds price

By Sheri Kasprzak

New York, March 6 - Traders said municipals followed closely with weaker Treasuries Thursday as dropping jobless claims shoved Treasury yields up.

Triple-A tax-exempt municipal yields were up by 2 basis points to 4 bps across the yield curve, according to Municipal Market Advisors data.

It was a similar story for Treasuries. The 30-year bond yield ended up 4 bps at 3.689%, and the 10-year note yield climbed by 3 bps to 2.736%. The five-year note yield rose by 2 bps to 1.567%.

For municipals at least, secondary selling pressure was a factor in rising yields.

"As with yesterday, secondary pressure is definitely an issue," a trader said in the afternoon.

The trader said a good number of transactions, particularly in the afternoon, were coming in cheaper.

Volume to be modest

New-issue volume, which was higher than typical at $5.5 billion this week, is expected to remain rather modest, said Alan Schankel, managing director with Janney Montgomery Scott LLC. A $2.8 billion offering of general obligation bonds from Puerto Rico could make up a good bulk of next week's new issue calendar.

"Of course, with two days to go, that will likely change," Schankel noted.

Meanwhile, inflows to municipal mutual funds were seen at $667 million for last week, marking the seventh week of positive flows, Schankel said.

Texas highway bonds price

Moving to Thursday's primary action, the Texas Transportation Commission hit the market with $1,157,795,000 of series 2014A revenue and refunding bonds. The offering was upsized from $891.99 million.

The bonds (Aaa/AAA/) were sold through Piper Jaffray & Co. and Citigroup Global Markets Inc.

The bonds are due 2017 to 2025 with term bonds due in 2031, 2033 and 2034, said a pricing sheet. The serial coupons range from 4.75% to 5%. The 2031 bonds have a 5% coupon and priced at 113.737, and the 2033 bonds have a 5% coupon and priced at 112.382. The 2034 bonds have a 5% coupon and priced at 111.934.

The commission is also expected to price $300 million of series 2014B Sifma index floating-rate bonds, which are due April 1, 2032, but the pricing terms for those bonds were unavailable Thursday.

Proceeds will be used to finance state highway projects and refund existing debt.

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