Munis end a busy day for primary unchanged; strong demand could help municipal/Treasury ratios

By Sheri Kasprzak

New York, April 25 - Municipals were little changed on Wednesday, with some slight weakness seen around 10 years, said traders reached during the session.

"Ten years is really volatile, and while everything else is pretty flat, 10 years is a touch off," one trader said.

"I would say that the reduced supply and continued demand has thrown the market off a bit."

Competitive offerings, which have been popular recently, were seen pricing at strong levels, said another trader.

Wednesday's competitive offerings were led by a $267.39 million sale of series 2012 right-of-way acquisition and bridge construction refunding bonds from the Florida Department of Transportation.

Citigroup Global Markets Inc. won the bid for the bonds (Aa1/AAA/AAA).

The bonds are due 2013 to 2031 with a term bond due in 2033. The serial coupons range from 2% to 5%. The 2033 bonds have a 4% coupon and priced at 105.878.

Proceeds will be used to refund existing bonds that were initially issued to purchase rights-of-way and make improvements to bridges.

Colorado Springs prices

Also during the session, the City of Colorado Springs came to market with $108,015,000 of series 2012B utilities system refunding revenue bonds, said a term sheet.

Bank of America Merrill Lynch won the bid for those bonds (Aa2/AA/AA).

The bonds are due 2013 to 2035 with term bonds due in 2038 and 2043. The serial coupons range from 3% to 5%. The 2038 bonds have a 4% coupon and priced at 100.34, and the 2043 bonds have a 4% coupon and priced at par.

Proceeds will be used to current refund existing utilities system revenue bonds.

Some issuers back off

In report released Wednesday, Alan Schankel, managing director with Janney Montgomery Scott LLC, said that a sluggish economy may have slowed borrowing somewhat, but state and local issuers are borrowing moderately.

"California, typically the most prolific of issuers, has cut back annual borrowing, excluding refundings, to about $5 billion from the $20 billion levels of recent years," Schankel wrote.

"The Port Authority of New York and New Jersey reduced its 10-year capital improvement program, about half-financed with debt, by $5 billion, deferring and cancelling projects. The pace of new-money borrowing will likely grow in the second half of the year once state and other budgets are finalized, but the next three months should see continuation of the current moderate flow."

Ratios could improve

Meanwhile, municipal/Treasury ratios could get some improvement from strong investor demand, said Schankel.

"Mutual fund flows provide illustration with $27 billion in new investment added to municipal bond funds since July 2011," said Schankel.

"Although the pace of inflows slowed in recent weeks, we expect growth in flows to continue ... now that April 16 tax payments are behind. Another component of demand is reinvestment proceeds. The monthly amount of flows based on proceeds from maturing and advance refunded bonds, excluding current refundings, will grow over the next three months, with the amount available for reinvestment reaching $30 billion in July."

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