Municipals show some weakness as Treasuries drop; week's new issue volume to total $5 billion

By Sheri Kasprzak

New York, May 6 - Municipals took on a softer tone on Monday as Treasuries declined, market sources reported.

Yields outside of 10 years were seen a touch off, said a trader in the afternoon.

"Treasuries are weaker, and we're following suit," the trader said.

"I think we're waiting to see how primary pans out. Trading was very light today. The [new issue] calendar looks manageable this week."

In fact, about $5 billion of new offerings are expected to hit the market with $3 billion set to price on a negotiated basis and $2 billion coming competitively.

Yields down for week

Yields were down for the week ended Friday, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

"The 10-year AAA MMD dropped by 1 basis point and ended the week at 1.68%, while the 30-year ended the week down 5 bps at a 2.82%," Kozlik wrote Monday.

"Since the beginning of April, the 10-year benchmark is now 21 bps lower, while the 30-year is down 27 bps in yield. Although many at the beginning of the year expected municipal benchmark yields to inch higher, the trend has been and may continue to be a downward march, at least for now. This is similar to the trend of municipal benchmark yields from May of last year. In May 2012, the AAA 10-year benchmark fell 12 bps to end the month at 1.75% and the 30-year was 21 bps lower at a 3.04%."

Demand improves

Meanwhile, demand seems to be improving somewhat, Kozlik noted, with Investment Company Institute reporting $133 million of flows into municipal mutual funds for the week ended April 24.

Investors will have about $5 billion of new offerings to chew on this week, led by a $300 million deal from the State of Illinois, said Kozlik.

The state is scheduled to price its series May of 2013 sales tax revenue Build Illinois Bonds on Thursday.

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

Louisiana preps deal

Coming up on Tuesday, the State of Louisiana plans to sell $300 million of series 2013 G.O. bonds.

The offering includes $130.71 million of series 2013A G.O. bonds, which are due 2014 to 2033, and $169.29 million of series 2013B taxable G.O. bonds, which are due 2014 to 2026.

Proceeds from that offering will be used to finance general government, cultural, tourism, recreation, public safety, corrections, transportation and education projects.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.