Munis firm on improved Treasuries, solid trading; Detroit COPs cut to D following default

By Sheri Kasprzak

New York, June 17 - Municipals finally caught a break on Monday, kicking off the week on a positive note, traders reported.

Yields were seen lower by 3 basis points to 6 bps in the afternoon. Maturities around 10 years saw the most improvement, and long bonds also experienced some significant improvement.

The week's new issue volume is expected to be around $7 billion, the most in recent weeks, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

"Volatility in the municipal market continued as high-grade yields fell slightly at the end of last week after continuing their rise throughout the middle of the week," Kozlik wrote Monday.

"Triple-A municipal market benchmark yields ended the week higher with the 10-year rising 10 basis points to 2.23% and the 30-year benchmark rising 16 bps, ending the week at a 3.5% yield."

After a difficult week last week, municipal-to-Treasury ratios were at an "attractive level," Kozlik said.

"The 10-year M/T ratio closed out Friday at 104% while the 30-year's final read was 106%," he wrote.

St. Joseph Health deal set

One of the largest deals of this week will come from the California Health Facilities Financing Authority, which will offer $763.67 million of series 2013 revenue bonds (A1/AA-/AA-) for the St. Joseph Health System.

Morgan Stanley & Co. LLC is the underwriter for the offering, the proceeds of which will be used to construct, equip, acquire, renovate and remodel the Hoag Hospital Newport Beach, St. Joseph Hospital, St. Jude Medical Center, St. Mary Medical Center and Santa Rosa Memorial Hospital.

Fitch chops Detroit COPs

In ratings news, Fitch Ratings downgraded its rating on Detroit's certificates of participation, including series 2005A and 2006A-B COPs issued through the Detroit Retirement Systems Funding Trust. The COPs were lowered to D from C.

"The D rating indicates failure to make payment of principal and/or interest under the contractual terms of the rated obligation," said a statement from Fitch.

"Fitch takes this action in response to the failure to pay the scheduled interest payment due on the certificates on June 14."

On Friday, the city's emergency manager, Kevyn Orr, unveiled the city's restructuring plan.

"Detroit faces a 50% chance of having to file for bankruptcy, according to Orr, but much has yet to be decided," Kozlik said Monday.

"As of now, it looks like the city is likely to stop making payments on $530 million of debt as part of the restructuring."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.