Municipals weaken again; California's G.O. bond deal will lead week's $8.5 billion volume

By Sheri Kasprzak

New York, March 8 - Municipals suffered again, this time from Treasury weakness as munis sold off on a better-than-expected labor report, said market sources.

New supply continues to rise, led by a $2.4 billion sale of general obligation bonds from the State of California.

About $8.5 billion of new issues are scheduled to price in the coming week, according to Alan Schankel, managing director with Janney Montgomery Scott LLC.

"After eight weeks of positive flows, Lipper reports $97 million of outflows from municipal bond mutual funds in the week ending March 6. Lipper reports of flows are timelier, but less comprehensive than ICI numbers, so we will learn next week if ICI numbers confirm the flow reversal," Schankel said.

California's three tranches

The California offering (A1/A/A-) will be sold in three tranches through J.P. Morgan Securities LLC and Goldman Sachs & Co. Final pricing is slated for Thursday.

The offering includes $1.09 billion of series 2013A various purpose G.O. bonds, $1 billion of series 2013B various purpose G.O. refunding bonds and $310 million of series 2013C taxable various purpose G.O. bonds, according to a preliminary official statement.

The state intends to use the proceeds from the deal to finance capital projects.

Portland CCD deal set

Also coming up on Thursday, the Portland Community College District of Oregon is scheduled to sell $177.56 million of series 2013 G.O. bonds on a competitive basis.

The bonds (Aa1/AA/) are due 2013 to 2033, and proceeds from the sale will be used to refund the district's series 2002A G.O. bonds.

Western Financial Group LLC is acting as the financial adviser for the offering.

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