Municipals outperform Treasuries with yields holding steady, firming; Puerto Rico trades thin

By Sheri Kasprzak

New York, Feb. 5 - Municipals once again outperformed a struggling Treasuries market on Wednesday with muni yields little moved to slightly firmer, market sources reported.

Yields were flat to a basis point or two better in spots, said a trader.

"Trading volumes are a bit light, but that's to be expected given the light supply," he said.

Treasuries, meanwhile, ended the day weaker after private-sector jobs data, which had been expected to see negative impacts from winter weather, added 175,000 jobs in January. After the data was released, the 30-year bond yield climbed by 5.5 bps after the data was released, closing at 3.647%, and the 10-year note yield rose by 4.5 bps at 2.671%. The five-year note yield rose 3 bps at 1.493%.

Puerto Rico trading thins

After Standard & Poor's cut Puerto Rico G.O. debt to BB+ from BBB-, trading on the commonwealth's paper thinned out on Wednesday, traders said.

"Before an announcement from S&P of a rating downgrade, many Puerto Rico trades continued to illustrate the relative stability we've seen since last year's tax selling pressure ended," said Alan Schankel, managing director with Janney Montgomery Scott LLC, on Wednesday.

"For example, looking at block trades of general obligation 5% due 2041, at 10:42 a.m. [Tuesday] they traded at 8.01%, the lowest yield for blocks of this bond since November."

San Diego airport bonds price

Heading up Wednesday's primary activity, the San Diego County Regional Airport Authority hit the market with $305,285,000 of series 2014 senior special facilities revenue bonds.

The deal included $29.39 million of series 2014A non-AMT tax-exempt bonds and $275,895,000 of series 2014B taxable bonds, said a pricing sheet.

The 2014A bonds are due July 1, 2044 and have a 5% coupon priced at 102.022 to yield 4.75%.

The 2014B bonds are due 2018 to 2021 with a term bond due in 2043. The serial coupons range from 2.537% to 3.73%, all priced at par. The 2043 bonds have a 5.594% coupon priced at par.

The bonds (A3/A-/) were sold through senior managers Siebert Brandford Shank & Co. LLC and J.P. Morgan Securities LLC.

Proceeds will be used to finance the construction of a centralized rental car facility at San Diego International Airport.

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