Municipal yields weaken again; Illinois postpones $500 million G.O. sale after S&P downgrade

By Sheri Kasprzak

New York, Jan. 30 - Municipals were off again on Wednesday as Treasuries weakened and secondary pressure was still evident, market sources said.

"There's still a bit of a backlog," one trader said of secondary activity.

New deals were the main attraction, with most of the deals pricing and repricing with bumps, said the trader.

Illinois delays G.O. bonds

Heading up primary news Wednesday, the State of Illinois' planned $500 million sale of series of February 2013 general obligation bonds was postponed. The move comes less than a week after Standard & Poor's dropped its rating to A- from A.

"Our conversations with potential bidders led us to believe that the market is unsettled because of recent actions and comments by the bond rating agencies," Abdon Pallasch, the state's assistant budget director, said Wednesday.

"We plan to schedule a new bond sale after the markets have had time to digest the news."

The bonds (A2/A-/A) were set to price competitively on Wednesday. Proceeds from the offering were expected to finance school and transportation projects as well as other state capital projects.

North Carolina prices

In other state G.O. news, the State of North Carolina sold $319.26 million of series 2013B G.O. refunding bonds, said a pricing sheet.

The bonds (Aaa/AAA/AAA) were sold competitively with Citigroup Global Markets Inc. winning the bid, said Walton Robinson, spokesman for the state treasurer's office. The true interest cost came in at 1.84%.

The bonds are due 2013 to 2025 with 3% to 5% coupons.

Proceeds will be used to refund the state's series 2003A-B G.O. public improvement bonds, series 2003 G.O. highway bonds, series 2004A G.O. public improvement bonds, series 2004 G.O. highway bonds, series 2005A G.O. public improvement bonds, series 2006A G.O. public improvement bonds and series 2007A G.O. public improvement bonds.

The refunding, according to a statement released by the treasurer's office, will save the state $45.3 million in debt service costs.

There were eight bids for the deal, said Robinson.

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