Municipals little changed after slow session; market prepares for $10.4 billion of new issues

By Sheri Kasprzak

New York, May 21 - Municipals remained mostly flat on Monday to kick off what might prove to be the biggest week for new issues in 2012, said market insiders.

Weak secondary activity and some fears that the coming supply will overwhelm the market left yields flat, said traders.

"There are some fears that even though demand has been fairly good, we're about to get so many new issues that we'll reach an oversaturation in the market," one trader said.

"We've also seen a bit of a decline in demand over the past couple of weeks, mostly because retail isn't interested in the current yields."

Volume is tops for 2012

Nearly $10.4 billion of new issues are expected to come to market in the coming week, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

"This week is shaping up to be the highest in terms of municipal volume for 2012," Kozlik said Monday.

"Negotiated primary and competitive volume has grown to $10.4 billion for the week of May 21, slightly north of the week of March 5 at $10.3 billion of sales."

The week's offerings will be led by an $800 million sale of general obligation bonds from the City of New York, which will price through Bank of America Merrill Lynch.

Other major offerings include a $247 million sale from the Massachusetts Water Pollution Abatement Trust and a $216 million offering from the Dormitory Authority of the State of New York.

New Mexico brings bonds

In Monday's light primary action, the State of New Mexico brought $57.99 million of series 2012A severance tax bonds, said a pricing sheet.

The bonds (Aa1) were sold competitively with Morgan Stanley & Co. LLC winning the bid, according to Stephanie Schardin Clarke, director of finance. The true interest cost was 1.47%.

The bonds are due 2013 to 2022 with 3% to 5% coupons.

"There were 12 bids," Clarke said in an interview.

"I think in our last sale, the TIC was between 1.6% and 1.7%. We do always sell our severance tax bonds competitively."

Proceeds will be used to finance capital improvements authorized by the state legislature.

San Francisco deal ahead

Leading Tuesday primary activity, the Public Utilities Commission of the City and County of San Francisco will bring $686.04 million of series 2012A-C water revenue bonds (Aa3/AA-/) competitively.

Another major competitive offering is also slated for Tuesday. The Commonwealth of Massachusetts is gearing up to price $350 million of series 2012B consolidated G.O. bonds.

Both bonds will fund capital projects for the issuer.

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