Municipals firm along with Treasuries; only $3 billion of new deals expected in week ahead

By Sheri Kasprzak

New York, Sept. 7 - Municipal yields firmed along with Treasuries following the release of the August labor report, but supply could continue to falter. Just $3 billion is expected for the week ahead.

"The lack of deals and continuing strong demand allowed tax-free yields to outperform Treasuries yesterday [Thursday], pushing M/T [municipal-to-Treasury] ratios back down towards 100%," wrote Alan Schankel, managing director with Janney Montgomery Scott LLC.

The light activity, according to one trader, might even be attributed to underwriters waiting for some negative news out of Europe to push rates lower before moving ahead with offerings.

The coming week will mark the third straight week with supply below $4 billion, said the trader.

Rhode Island's Central Falls to exit bankruptcy

In bankruptcy news, the City of Central Falls, R.I., is preparing to exit from bankruptcy.

"With all of the summer noise coming out of California's Stockton and San Bernardino bankruptcy filings, positive news for bondholders has emerged in Rhode Island with court approval of Central Falls' exit from bankruptcy, only 13 months after beginning the process without any missed bond payments," Schankel said.

"A major compromise came from retirees who agreed to a 55% reduction in pensions and medical payments. The resolution is a positive credit signal for Rhode Island municipalities, with state support coming from two laws - one which prioritizes debt service payments and a second which established a three-tier process for distressed municipalities, the final step being appointment of a receiver, as was the case with Central Falls."

Duxbury brings G.O. loans

Elsewhere, the Town of Duxbury, Mass., released additional information on its $83,447,000 sale of series 2012 general obligation municipal purpose loans.

On Thursday, the town sold the bonds competitively with Citigroup Global Markets Inc. winning the bid, said Thomas Connolly, the town's treasurer.

The bonds are due 2013 to 2037 with 3% to 4% coupons.

"The Town of Duxbury tries to sell its debt competitively," Connolly said Friday. "Market conditions were not a factor in that decision."

Proceeds will be used to construct a crematory, a fire station, a police station and two schools.

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