Municipals close flat to weaker as deals price for retail; secondary action remains light

By Sheri Kasprzak

New York, April 2 - Municipals closed out a slow session on a flat-to-slightly-weaker note, said traders reached during the day.

"That middle range is still seeing the most volatility, and we are experiencing some weakness around the belly of the curve," one trader said in the afternoon.

"We're talking maybe a basis point or two. It's been a quiet day for bids, so there's not much to really give us direction."

Even so, retail investors were coming out for some of the week's larger deals, including a $1.08 billion offering of cigarette tax revenue refunding bonds from the New Jersey Economic Development Authority.

"Looks like there has been some decent interest in the New Jersey tobacco deal, and that will probably set the tone for the day tomorrow," one trader said on Monday.

New-issue volume should reach about $8.8 billion for the week, according to Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC. With the Good Friday holiday coming up at the end of the week, many market sources feel the bulk of the week's pricing activity will occur in the first two or three days of the week.

New Jersey tobacco deal ahead

One of the largest offerings of the week will come to market Tuesday. The New Jersey Economic Development Authority is scheduled to bring $1.08 billion of cigarette tax revenue refunding bonds (/BBB+/BBB+) through Bank of America Merrill Lynch.

The authority intends to use the proceeds to refund an outstanding series 2004 bond issue.

Kaiser deals coming up

The biggest deal of the week is a $1.5 billion sale of series 2012A revenue bonds from the California Statewide Communities Development Authority for Kaiser Permanente. The offering is one of two deals expected to price on Kaiser's behalf.

The $1.5 billion deal will be sold through Citigroup Global Markets Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC.

The bonds (/A+/A+) will be used to finance the construction, acquisition, equipment and furnishing of hospitals, health facilities and offices operated by Kaiser.

Kaiser also intends to price a standalone offering of taxable bonds through Citi, Goldman Sachs and JPMorgan.

Proceeds from that offering will used for general corporate purposes for the health system.

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