Municipals hold steady ahead of $4 billion new-issue calendar; California, Chicago lead deals

By Sheri Kasprzak

New York, Sept. 8 – Municipals rounded out Monday mostly flat as the market awaited a slightly larger new-issue slate, market insiders said. Treasuries were somewhat weaker.

Municipals were flat outside of 20 years with some slight cheapness seen in shorter maturities, said a trader during the afternoon.

Meanwhile, the 10-year Treasury note yield rose by 2 basis points to close at 2.48%, and the five-year note yield climbed by 3 bps to 1.72%. The 30-year bond yield, meanwhile, held steady at 3.23%. The declines were fueled in part by a surge of new issuance in the corporate bond market, which is expecting $30 billion of new offerings this week.

Looking ahead, the muni calendar will feature about $4 billion of new offerings after the sparse action of last week. Demand remains strong, according to Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC. Inflows to municipal mutual funds were reportedly $731 million for the week of Aug. 27, Kozlik said Monday.

California leads with notes

Heading up the competitive side of the slightly larger calendar, the State of California is slated to hit the market with $2.8 billion of series 2014-2015 revenue anticipation notes (MIG 1/SP-1+/F1) on Wednesday.

The notes are due June 22, 2015, and proceeds from the deal will be used to finance general fund expenditures ahead of the collection of certain revenues in the coming fiscal year.

Chicago water plans deal

Also coming up this week, the City of Chicago is in the market with $372,205,000 of series 2014 second-lien water revenue bonds (A3/AA-/AA) through PNC Capital Markets LLC.

The bonds are due 2015 to 2034 with term bonds due in 2039 and 2044.

The city intends to use the proceeds to finance capital improvements and upgrades to the city’s water system.

The city has another large deal out on the horizon – $300,715,000 of wastewater project bonds (A3/AA-/AA) through BofA Merrill Lynch.

Proceeds from that deal will be used to finance wastewater capital projects.

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