Municipals end mostly flat ahead of just $5 billion new issues; Connecticut among major deals

By Sheri Kasprzak

New York, May 19 - Municipals outperformed Treasuries on Monday by remaining mostly unchanged, insiders reported.

With a subdued primary calendar totaling under $5 billion for the week, supply pressure is nearly nonexistent, said a trader.

"Secondary has been relatively quiet," he said in the afternoon.

"There might be some firmness in spots, but there's not a lot of movement. I think we're waiting to see how a couple of deals are going to pan out. There does seem to be some interest in Connecticut," which is offering $650 million of general obligation bonds.

Meanwhile, widening spreads between intermediate and long yields shoved Treasury prices down Monday. The 30-year bond yield rose by 4.5 basis points to close the day at 3.39%, and the 10-year note yield climbed by 2.5 bps to 2.545%. The five-year note yield rose by about half a basis point to close at 1.544%.

The move was a reversal of last week, when the curve remained mostly flat.

Connecticut preps G.O. deal

Amid the light primary action in the week, which will lead into a holiday-shortened week, Connecticut is slated to price $650 million of series 2014C G.O. refunding bonds on Tuesday through Morgan Stanley & Co. LLC.

The bonds are due 2014 to 2025.

Proceeds will be used to refund the state's series 2004B and 2005C-D G.O. bonds.

Missouri highway bonds set

Also ahead, the Missouri Highways and Transportation Commission is expected to price $894.45 million of series 2014 refunding state road bonds through BofA Merrill Lynch on Tuesday.

The deal includes $581.98 million of series 2014A first-lien bonds (Aaa/AAA/AAA), which are due 2017 to 2026, and $312.47 million of series 2014B second-lien bonds (Aa1/AAA/AA+), which are due 2018 to 2025.

Proceeds from the sale will be used to refund the commission's series 2006 bonds.

The offering comes as the state's roads and bridges construction budget has fallen to $685 million. By 2017, that budget is projected to drop to $325 million, according to the Missouri Department of Transportation.

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