Municipals drop in sell-off; yields rise 6 bps to 8 bps on long end; heavy supply on docket

By Cristal Cody

Tupelo, Miss., Oct. 21 – Municipal bonds traded mostly lower across the curve in a sell-off on Tuesday as the week’s primary activity kicked off, according to market sources.

Yields climbed 6 basis points to 8 bps on the long end, a source said.

Treasuries ended lower following a report that showed the strongest growth in existing-home sales in a year. The benchmark 10-year Treasury note yield rose 3 bps to 2.21%.

Fairfax County, Va., brought its offering of series 2014B public improvement refunding bonds (Aaa/AAA/AAA) in a competitive sale, a source close to the deal said.

Citigroup Global Markets Inc. was the winning bidder. The firm originally planned to sell $230,325,000 of bonds. Final pricing details were not expected until after press time.

More than $7 billion of municipal bonds are expected to price over the week, led by a $1 billion offering of toll revenue refunding bonds from San Joaquin Hills Transportation Corridor Agency in California.

“Most people think we should be able to absorb the supply because there haven’t been that many bonds around,” a trader said.

New issuance expected on Wednesday includes a $700 million offering of general obligation consolidated loan bonds from Massachusetts and a $309.9 million sale of educational facilities revenue and revenue refunding bonds from the Virginia College Building Authority.

Looking ahead to the end of the month, the Indiana Municipal Power Agency plans to price $172.61 million of power supply system refunding revenue bonds in a negotiated sale via lead manager Citigroup.

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