Munis end session mixed ahead of heavier supply; Puerto Rico defaults on $58 million payment

By Sheri Kasprzak

New York, Aug. 3 – Puerto Rico missed a debt service payment for the Puerto Rico Public Finance Corp. over the weekend, marking the first time the island commonwealth has ever defaulted on its debt.

The commonwealth’s legislature had been scheduled to make the payment on Saturday, but the legislature did not appropriate the funds in the current fiscal year budget. This could mark the first of many defaults for Puerto Rico.

The island’s economy has been suffering for quite some time. According to the June Economic Activity Index, the commonwealth’s index declined 0.4% compared to June 2014 and 1.6% for fiscal year 2015 compared to fiscal year 2014.

On Monday, the commonwealth’s series 2012 general obligation bonds were actively traded. The 5% 2041s opened the session at 59.65 with a 9.066% yield to maturity. By 2 p.m. ET, the bonds were trading at 58 with a 9.323% yield to maturity. The bonds ended the day at 57.776 with a 9.358% yield to maturity.

New York a popular trade

Despite Puerto Rico’s turmoil, the most actively traded name Monday was the City of New York. Its series 2016B G.O. bonds 3% of 2028, which priced last week, topped the day’s secondary activity.

The bonds were seen at 102.717 at the end of the trading day after trading between 98.86 and 102.717. The bonds priced Friday at 99.361 to yield 3.06%.

Central Puget Sound to price

Looking to the broader market Monday, munis were narrowly mixed on the day with shorter maturities seeing yields rise slightly and longer yields falling as the market readies for a slightly more robust calendar.

Heading up the heavier slate of new issues, the Central Puget Sound Regional Transit Authority of Washington state is on tap to sell $923.84 million of series 2015S sales improvement bonds (Aa2/AAA/) Tuesday, the largest deal of the $7.8 billion of supply ahead this week.

The offering includes $723.84 million of series 22015S-1 bonds and $200 million of series 2015S-2 green improvement bonds.

J.P. Morgan Securities LLC leads the syndicate selling the debt.

Proceeds will construct a portion of the authority’s transit system and refund existing debt.

Connecticut readies G.O.s

Among the other larger deals, the State of Connecticut is scheduled to price $500 million of G.O. bonds Tuesday competitively.

That deal includes $250 million of series 2015E G.O. bonds and $250 million of series 2015B taxable G.O. bonds.

Proceeds will be used to finance capital expenditures for the state.

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