Munis flat to weaker with $9 billion in new issues ahead; California plans $1.9 billion G.O.s

By Sheri Kasprzak

New York, Feb. 27 – Municipals finished the week flat to somewhat softer on the long end, traders reported, as the market gears up for another heavy new-issue calendar.

Yields on 30-year bonds rose by about 2 basis points with the rest of the yield curve relatively unchanged even as Treasuries closed flat.

About $9 billion in new offerings is slated to come to market, about the same as the past week. Leading the charge is a $1.9 billion G.O. deal from the State of California.

The state last came to market with G.O. bonds in November when it sold $1.2 billion of various purpose G.O.s in a three-tranche deal with yields from 0.15% to 3.90%.

Fitch raises California debt

Ahead of the state’s offering, which is scheduled for pricing Tuesday, Fitch Ratings upgraded the California’s G.O. debt to A+ from A, noting its improving fiscal position.

One market source said Friday that 10-year California G.O.s carried yields as much as 157 bps over the MMD’s triple-A benchmark yield in early 2010, noting the state’s fiscal recovery is “evident in stronger trading metrics.”

“By the beginning of last year, the spread had contracted to 56 bps and in recent trading stood at 19 bps,” said source said.

Offering in two tranches

Tuesday’s deal will be conducted in two tranches – $790 million of series 2015 G.O.s and $1.11 billion of series 2015 G.O. refunding bonds.

The bonds (Aa3/A+/A+) will be offered through senior managers BofA Merrill Lynch and Morgan Stanley & Co. LLC with Fidelity Capital Markets Inc. as the co-senior manager.

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

L.A. power supply deal set

Another major offering this week comes from the Los Angeles Department of Water and Power, which is on tap to price $495 million of series 2015A power supply revenue bonds (Aa3/AA-/AA-).

The bonds will be sold through senior managers BofA Merrill Lynch and Barclays, and are due 2028 to 2040.

Proceeds will refund the department’s series 2005A power supply revenue bonds.

In mid-December, the department sold $229 million of power supply revenue bonds with 1.07% to 3.13% yields and maturities from 2019 to 2035 with term bonds from 2039 and 2044.

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