Munis improve, outperform Treasuries as secondary action heats up; Washington sells G.O. bonds

By Sheri Kasprzak

New York, June 25 – Municipals outperformed Treasuries on Wednesday, improving as secondary activity improved, traders said.

“Given the supply increase we’ve recently encountered, we’re seeing a busier day for trades,” one trader said. “Demand is definitely out there.”

Demand was also strong for new issues that dominated the market during the session.

Municipal yields were improved by 2 basis points to 3 bps across the curve, with long bonds seeing the most improvement. Treasuries, meanwhile, were lower by 1 bp across the curve.

Looking to news during the session, Moody’s Investors Service upgraded California’s credit rating to Aa3 from A1.

“The upgrade ... reflects the state's rapidly improving financial position, high but declining debt metrics, adjusted net pension liability ratios that are close to the state median, strong liquidity and robust employment growth,” the agency said in a news release.

“The Aa3 rating also reflects the state's volatile tax revenue structure and governance restrictions, in addition to certain recent governance changes and proposals that are meant to address those longstanding issues.”

Washington brings G.O. bonds

Heading up the day’s primary action was another billion-dollar offering, this time from the State of Washington. The state offered $1,156,145,000 of series 2015 general obligation bonds.

The deal included $207,015,000 of series 2015A-1 various purpose G.O. bonds, $22.58 million of series 2015A-2 various purpose G.O. bonds, $420,085,000 of series R-2015A various purpose G.O. bonds, $85.92 million of series 2015T taxable G.O. bonds and $420,545,000 of series R-2015B motor vehicle fuel tax G.O. refunding bonds, said a pricing sheet.

The bonds (Aa1/AA+/AA+) were sold through both competitive and negotiated sale. BofA Merrill Lynch was the underwriter for the 2015A-2 various purpose G.O. bonds, but the winners for the remaining notes were not immediately available Wednesday.

The 2015A-1 bonds are due 2025 to 2039 with 5% coupons and yields from 2.63% to 3.51%.

The 2015A-2 bonds are due 2015 to 2024 with term bonds due in 2029, 2034 and 2039. The serial coupons range from 2% to 5% with yields from 0.12% to 2.53%. The 2029 bonds have a 3.25% coupon and priced at 98.823 to yield 3.35%. The 2034 bonds have a 3.5% coupon and priced at 98.017 to yield 3.64%. The 2039 bonds have a 3.75% coupon and priced at 98.083 to yield 3.87%.

The series R-2015A various purpose bonds are due 2017 to 2026 with 4% to 5% coupons and yields from 0.70% to 2.88%.

The series 2015T taxable bonds are due 2015 to 2025 with coupons from 0.15% to 3.12% and all priced at par.

The series R-2015B motor vehicle fuel tax bonds are due 2017 to 2026 with 4% to 5% coupons and yields from 0.62% to 2.81%.

Proceeds will be used to finance capital projects, including new school construction, and to refund existing G.O. debt.

© 2015 Prospect News.
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