Municipals close weaker again as market braces for $11.3 billion supply; Salt River deal ahead

By Sheri Kasprzak

New York, May 11 – Municipals rounded out another session on a weak note Monday with yields climbing by as much as 5 basis points, said traders in the afternoon. The market is anticipating another massive slate of offerings, this time with about $11.3 billion on tap.

Municipals have faced a glut of supply in recent weeks, said a sellside source Monday afternoon.

“There are a lot of desks that are grappling with it [the supply],” he said.

“Bonds are stagnating. I suspect once the summer slowdown gets underway, that will change.”

Munis were also pressured by Treasuries, which plummeted on the day as a sell-off sparked by economic uncertainty in Greece sent yields up by as much as 13 basis points.

Salt River leads supply

This week’s action will be led by an $832,895,000 offering of series 2015A electric system revenue bonds (Aa1/AA/) from the Salt River Project Agricultural Improvement and Power District of Arizona.

The bonds will be offered through Goldman Sachs & Co.

Proceeds will be used to refund the district’s series 2004A, 2005A and 2006A electric system revenue bonds.

Connecticut organizes deal

Another major deal comes from Connecticut. The state held a retail order period for the bonds Monday. Pricing for institutions is expected Tuesday.

The state is offering $500 million of series 2015B general obligation bonds (Aa3/AA/AA).

Siebert Brandford Shank & Co. LLC is the senior manager for the bonds, which are due 2016 to 2035.

Proceeds will be used to finance state capital projects.

Puerto Rico 2035 bonds up

Moving to secondary action, Puerto Rico’s 8% G.O. bonds of 2035 were seen trading up around a 78-79˝ level.

The bonds had reportedly been down in the last few sessions.

Between $12 million and $13 million traded with 78 as the low, ending around 79˝.

The commonwealth, the trader said, will likely be restructured, especially with prices below 80.

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