Municipals steady ahead of $3 billion new deals; uncertainty for states dissipates, Fitch says

By Sheri Kasprzak

New York, March 17 - Municipals were mostly unchanged on Monday, largely ignoring weaker Treasuries, as the market awaited the week's much-smaller pool of new offerings, market sources said.

"We're still absorbing last week's supply, but I think this week's slate should get gobbled up pretty quickly," said a trader.

"There's still a great deal of demand, but supply has been hit or miss. Last week was the first big week of offerings we've had in a while."

Looking to Treasuries, yields were higher as the market awaited the Federal Open Market Committee rate decision on Wednesday and as the citizens of the Crimean Peninsula region of Ukraine voted to secede and join Russia. The 10-year note yield rose by 3.5 basis points to end at 2.69%, and the 30-year bond yield rose by more than 2.5 bps to end the day at 3.626%.

Fitch: Uncertainty dissipates

Moving to ratings news, Fitch Ratings said Monday that the significant uncertainty with which U.S. states entered 2014 has dissipated as revenues and spending have been in line with budget forecasts.

"Two anticipated risks to budget forecasts - health-care reform and federal inaction - have had little negative impact on U.S. state credit this year," Laura Porter, managing director of public finance, said in a statement.

"While the actual implementation of health-care reform has been difficult, this has not had a material negative budgetary effect. Also, the congressional spending agreement has alleviated the threat that federal development could derail the economic recovery or lower funding to states."

The final test of the accuracy of forecasts related to last year's income acceleration dynamic will be April income tax results, Porter said. States are seeing more upside than downside potential for revenue results, despite harsh winter weather, she added.

Wisconsin offering ahead

Heading up the week's primary action, the State of Wisconsin is set to price $393.61 million of series 2014 transportation revenue and revenue refunding bonds on Thursday.

The bonds (Aa2/AA+/AA+) will be sold through Jefferies & Co.

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

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