Munis off a touch; Illinois brings $300 million; economy slows health-care growth, Fitch says

By Sheri Kasprzak

New York, May 9 - Municipals were weaker by a basis point or two, traders reported on Thursday.

"There seems to be a little bit of weakness, particularly beyond 10 years," a market source said.

"Secondary is seeing a bit of pressure, we're finding."

Meanwhile, one of the largest deals of the week hit the market.

Illinois prices $300 million

The State of Illinois came to market with $300 million of series May of 2013 sales tax revenue Build Illinois Bonds, said a pricing sheet.

The bonds (/AAA/AA+) are due 2014 to 2029 with term bonds due in 2032 and 2037. The serial coupons range from 0.75% to 3.45% with yields from 0.30% to 3.45%. The 2032 bonds have a 3.75% coupon and priced at par, and the 2037 bonds have a 3.88% coupon and priced at par.

The bonds were sold competitively with Wells Fargo Securities LLC winning the bid.

Proceeds will be used to finance state capital projects.

U.S. health-care spending low

Fitch Ratings reported Thursday that growth in health-care spending will likely be held down by the sluggish economy.

"As we first observed in January 2012, the rate of increase in U.S. health-care spending is likely to remain low even as the end of the tepid economic recovery gives way to more robust growth," Emily Wong, James LeBuhn and Rob Rowan, senior directors with Fitch, said in a report.

"The rate of health spending grew by 3.9% annually from 2009 to 2011, compared with an annual growth rate of between 4.7% and 6.6% the prior three years, according to data from Centers for Medicare and Medicaid Services."

Fitch referred to two recent studies published in Health Affairs that found that the weaker economy was accountable for 37% of the lower spending trajectory and attributed an additional 8% to cuts in Medicare reimbursement and decline in commercial insurance coverage.

"The study leaves 55% of the reduction unexplained," the directors said.

One study indicated that benefit design changes, including higher deductibles and out-of-pocket costs, contributed to 20% of the lower increase in spending.

"Over the short run, we expect this trend to have little impact on ratings," they said.

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