Munis mostly flat; $6 billion of deals forecast for week; mutual fund selling worries market

By Cristal Cody

Tupelo, Miss., Aug. 5 - Municipals ended Monday flat to about 2 basis points wider in thin trading, market sources said.

"It's very, very quiet - a typical summer Monday," one trader said. "The calendar is a little larger this week than it normally is in August, so there's a little pressure."

About $6 billion of new issuance is expected to price, compared with the average August amount of $5 billion, the source said.

Some large deals expected to hit the market over the week include Minnesota's $470.21 million three-tranche offering of general obligation state bonds via a competitive sale on Tuesday, South Carolina Public Service Authority's $1.75 billion negotiated sale of revenue obligation bonds (Aa3/AA-/AA-) and the University of California Medial Center's $665 million negotiated offering of pooled revenue bonds (Aa2/AA-/AA), informed sources said.

Also coming up, the State of Washington plans to price $863.79 million of G.O. bonds (Aa1/AA+/AA+) via a competitive sale on Wednesday, according to a preliminary official statement.

Municipal bond market participants also focused Monday on the large mutual fund outflows from the previous week, according to an informed source.

"There was some selling last week in mutual funds - about $2 billion in mutual funds, so there's people worried," the source said. "People are concerned where there's mutual fund outflows, especially over $1 billion, happening because that sometimes leads to displacement in the market. Managers have been selling blocks of bonds way too cheap."

Washington sale ahead

Washington's sale includes $532.94 million of series 2014A various purpose G.O. bonds, $275,125,000 of series 2014B motor vehicle fuel tax G.O. bonds and $55,725,000 of series 2014T taxable G.O. bonds.

The series 2014A and series 2014B bonds have serial maturities from 2017 through 2038, while the series 2014C bonds are due 2014 though 2017.

Montague DeRose and Associates, LLC and Piper Jaffray & Co. are the financial advisers.

Proceeds will be used to fund various capital projects and state programs.

Los Angeles County Museum of Art to price $240 million

In other new issuance expected on the horizon, the California Infrastructure and Economic Development Bank plans to bring $240 million of series 2013 refunding revenue bonds (A3//) for the Los Angeles County Museum of Art, according to a preliminary official statement.

The offering includes $80 million of series 2013A bonds, $80 million of series 2013B bonds and $80 million of series 2013C bonds.

Wells Fargo Securities LLC and Mitsubishi UFJ Securities (USA) Inc. are the underwriters.

The bonds are subject to mandatory tender for purchase on Aug. 1, 2018.

Proceeds will be used to refund and redeem the outstanding series 2008A, 2008B, 2008C, 2008D and 2008E refunding revenue bonds.

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