Munis end session mostly unmoved; San Francisco Public Utilities preps for $375 million sale

By Sheri Kasprzak

New York, Aug. 31 - The week in municipals kicked off mostly flat as the primary calendar thinned out. Some market sources said Monday that municipals will likely retain a flat tone for most of the week.

Even so, Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC, said the light primary calendar might lower yields.

"Light municipal supply seems to be the largest issue driving yields down, as funds clearly have cash and are willing to invest," LeBas said.

"The muni supply calendar was light last week and will likely remain so for the next several; supply this week will be just shy of $3 billion, the smallest level in two months."

LeBas reported Monday that 30-year municipals saw yields drop by 30 basis points from the end of July to the end of August, even as yields in the five- to 10-year range held close to the 1.81% to 2.95% range.

One trader said light supply will most likely mean a fairly unchanged market throughout the week.

"Maybe yields will go down slightly, but I think it will be mostly quiet and mostly unchanged," the trader said.

Treasuries get a boost

Meanwhile, Treasuries saw some strength on Monday with the 10-year and two-year bonds making the most gains. Both 10- and two-year Treasuries were seen down 4 bps. Thirty-year Treasuries were down 2 bps.

Among light municipal trading action Monday, traders saw several Build America Bonds moving in the secondary.

"We're seeing a good deal of demand [for Build America Bonds], mainly because a lot of these priced over the past week," one trader said.

The Upper St. Clair School District in Pennsylvania saw its series 2009B Build America Bonds trading. The 5.986% 2034 bonds were seen at 5.682%. The bonds priced last week at par.

Elsewhere, the City of Orlando's series 2009C Build America Bonds were also moving. The 6.85% 2029s were seen at 6.484% after pricing at par.

The Dallas County Hospital District's series 2009B Build America Bonds were also trading. The 6.171% 2034 bonds were seen at 5.98%.

San Francisco utility sale ahead

Looking to Tuesday's pricing action, the San Francisco Public Utilities Commission is expected to bring to market $375 million in series 2009B water revenue bonds (A1/AA-/), which will be sold competitively.

Proceeds will be used to fund the construction, acquisition, equipment and design of various water improvements throughout the city.

Also Tuesday, the Oklahoma Capital Improvement Authority plans to sell $152 million in series 2009 state highway capital improvement revenue bonds (/A-/).

RBC Capital Markets Inc. is the lead manager.

Proceeds will be used to fund capital improvements to the state's highway system.

South Dakota HEFA plans sale

In other upcoming sales, the South Dakota Health and Educational Facilities Authority plans to price $71.625 million in series 2009 revenue bonds for the Sanford Health System, said a preliminary official statement.

The bonds (/AA-/) will be sold on a negotiated basis with Cain Brothers as the senior manager.

The maturities have not yet been set.

Proceeds will be used to reimburse Sanford Health for a heart health center in Sioux Falls, S.D.

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