Municipals narrowly mixed as market awaits $9.5 billion supply flood; L.A. school bonds ahead

By Sheri Kasprzak

New York, May 4 – Municipals were weaker in spots and little changed in others as investors awaited a new influx of offerings, market insiders said.

The 10-year yield was up about 5 basis points with shorter maturities seeing yields fall by about 1 bp, said a trader in the afternoon.

Treasuries were weaker across the board with the 30-year yield rising to a five-month high of 2.88%.

Refundings top supply

The real story for the week will be new-issue volume, which is up at $9.5 billion, about twice last week’s pace.

The term “new issues,” however, is a bit of a misnomer as refundings are dominating the market right now.

“We’d have to go back to 2008 to experience an April with as much new municipal issuance as tallied last month, but the busiest April in seven years does not encompass the entire story,” said Alan Schankel, managing director with Janney Montgomery Scott LLC, in a note Monday morning.

“There is ‘new’ as in new to the market and then again there is ‘new’ as in new money for new projects (as opposed to issues which finance the refunding of previously issued bonds). New issue municipal volume in the first four months of the year, at $144 billion, is 58% ahead of the same 2014 period, yet new money volume, at $41 billion, actually fell by 7% compared to last year. Based on the coming week’s $9 billion-plus primary market slate, large issuance totals are continuing to trend higher, but as the year progresses, we could see the strong issuance trend diminish.”

L.A. school deal set

Leading the charge of those refundings this week is the Los Angeles Unified School District, which is on the calendar Tuesday with a $326,565,000 general obligation refunding sale (Aa2/AA-/).

The bonds will be sold competitively and are due 2015 and 2019 to 2025.

These bond are being issued to refund the district’s series 2005A-1 and 2005A-2 G.O. bonds.

Athens-Clarke bonds to price

Another major refunding for the week comes from the Unified Government of Athens-Clarke County in Georgia.

The home of the University of Georgia will offer $209,675,000 of series 2015 water and sewerage revenue bonds (Aa1/AA/AA+) through Citigroup Global Markets on Tuesday.

The bonds are due 2016 to 2038 and will be utilized to refund the government’s series 2008 water and sewerage bonds.

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