Munis firm despite Treasury slide; Fitch says downgrades outnumber upgrades in first quarter

By Sheri Kasprzak

New York, April 17 - Municipals significantly outperformed a sliding Treasuries market Thursday in a short session ahead of the three-day weekend, traders said.

"The short to intermediate portions were definitely firmer, maybe 1 to 2 bps, but out long, mostly unchanged," a trader said in the afternoon.

Secondary action was very light ahead of the Good Friday holiday.

Meanwhile, some positive manufacturing data out of the Federal Reserve Bank of Philadelphia sent Treasury yields soaring. The 10-year note yield was up 8.5 basis points to close out the session at 2.721%. The five-year note yield rose 7.5 bps to 1.731%, and the 30-year bond yield climbed 6.5 bps to 3.517%.

The week ahead will offer a bit more supply for municipal investors, with about $6.5 billion of new offerings expected.

Fitch says Q1 downgrades up

Elsewhere during the session, Fitch Ratings reported that U.S. public finance downgrades outnumbered upgrades during the first quarter of 2014 - the 21st consecutive quarter that this has been the case.

"Downgrades still account for a small percentage of total public finance rating actions," wrote senior director Sarah Repucci and managing director Vincent Barberio.

According to the report, Fitch downgraded 37 credits, representing 5.2% of all rating actions and $51.9 billion of par value, and upgraded 21 credits, which represented 3% of all rating actions and $2 billion in par value, during the first quarter.

In the fourth quarter of 2014, Fitch downgraded 25 credits and upgraded 23 credits.

"While negative actions are expected to remain elevated, as negative rating outlooks exceeded positive rating outlooks (2.6:1) at the end of 1Q2014, this is the third quarter in a row that this ratio has decreased," the analysts wrote.

"The vast majority of rating actions (88%) during the first quarter were affirmations, with no change in rating outlook or rating watch status. Furthermore, 91% of ratings had a stable rating outlook at the end of the first quarter."

California deal ahead

Looking to the coming week, the State of California will offer up $750 million of series 2014 various purpose general obligation bonds (A1/A/A) on Tuesday.

The offering includes $575 million of series 2014 tax-exempt bonds and $175 million of series 2014 taxable bonds.

The bonds will be sold competitively.

Proceeds from the offering will be used to finance capital projects within the state and repay commercial paper.

© 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.