Munis weaker ahead of subdued $8.2 billion calendar; Pennsylvania eyes $1.2 billion G.O. bonds

By Sheri Kasprzak

New York, Aug. 8 – Municipals were slightly off on Monday as the market prepares for a lighter new-issue calendar and digests more than $14 billion of new offerings that priced last week, market sources said.

The 10-year triple-A muni bond yield rose by 1 basis point to 1.49%, and the 30-year triple-A yield rose 1 bp to 2.33% as Treasuries ended mixed as the odds of a federal funds rate hike this year have jumped to 1 in 2.

Over in Treasuries, the 30-year bond yield fell by 2 bps to 2.30%, and the five-year note yield rose by 2 bps to 1.15%.

Looking to the week, about $8.2 billion of new offerings are expected to hit the market.

Pennsylvania G.O. bonds set

Headlining the new issues is a $1,208,725,000 offering of general obligation bonds (Aa3/AA-/AA-) from Pennsylvania.

The commonwealth plans to price the bonds competitively. Pricing is scheduled for Tuesday.

The bonds are due 2017 to 2036, and proceeds will fund capital facilities projects.

U of California deal ahead

Coming up on Wednesday, the University of California will be in the market with $1,048,850,000 of medical center pooled revenue bonds through senior managers Barclays, J.P. Morgan Securities LLC and Siebert Brandford Shank & Co.

The deal includes $807.17 million of series 2016L tax-exempt bonds and $241.68 million of series 2016M taxable bonds.

Proceeds from the offering will finance capital projects at the UC Davis Medical Center, the UC Irvine Medical Center, the UCLA Medical Center, the UC San Francisco Medical Center and the UC San Diego Medical Center.

Eric Kazatsky, municipal credit analyst with Janney Montgomery Scott LLC, said Monday the bonds are supported by the revenues of the university’s five medical centers.

“Operating margins at all campuses are positive yet vary, ranging from 2% to 13% for the latest fiscal year,” Kazatsky said.

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