Municipals end firmer; week ahead has $5 billion new deals led by $435 million Chicago deal

By Sheri Kasprzak

New York, May 4 - Municipals were once again firmer as secondary activity flowed from the steady stream of new issues priced earlier in the week, market insiders said. The largest deal of the week, a $1.8 billion offering from the State of Illinois, saw a significant amount of interest in the secondary market.

"Supply was heavy, and most of that is getting absorbed really quickly," said one trader reached during the afternoon.

"There seems to be a lot of demand for Illinois in [the] secondary. Yields are trimming just a bit for those still."

On Thursday, the 5% 2025 bonds were seen at 3.86% after pricing to yield 4%.

In the coming week, about $5 billion of new issues are expected, according to Alan Schankel, managing director with Janney Montgomery Scott LLC.

Chicago deal tops issuance

"This week's new issue flow seems to have been well absorbed with plenty of demand left over for next week's slate, which currently appears to total about $5 billion, topped by $435 million Chicago water revenue bonds and including several health care issuers," Schankel wrote on Friday.

"Inflows to municipal mutual funds picked up in the week ending April 25, with $825 million of new money coming in the doors. The average pace of weekly inflows has run about $350 million since mid-March, so it's not unexpected that inflows would rise in the first post-tax payment week. With the exception of one small decline, flows have been positive for 35 weeks, totaling $19 billion in 2012."

Water bonds to fund extension

The Chicago offering of series 2012 senior-lien water revenue project and refunding bonds (Aa3/AA-/AA) will be sold during the coming week through senior manager Siebert Brandford Shank & Co. LLC.

Proceeds from that deal will be used to finance capital improvements and extensions to the water system, as well as to refund existing bonds.

Coming up on Tuesday, the Maricopa County Community College District of Arizona is scheduled to price $69,135,000 of series 2012 general obligation refunding bonds (Aaa/AAA/AAA) competitively.

The bonds are due 2015 to 2019.

Proceeds will be used to refund the district's series 2005A project of 2004 G.O. bonds.

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