Municipal yields finish weaker despite stronger Treasuries; $6 billion of new issues ahead

By Sheri Kasprzak

New York, July 30 - Municipal yields were slightly weaker on Monday despite stronger Treasuries, market insiders reported.

"We're off a bit, but not by that much. We're really waiting to get some direction, and I think that will come as we start seeing where some of the bigger deals of the week come in during retail order periods," one trader said.

Another trader suggested that perhaps the weaker tone is just a continuation of Friday's dip.

The market can expected about $6 billion of new issues this week, led by a $1.15 billion offering from New York's Triborough Bridge and Tunnel Authority, said Tom Kozlik municipal credit analyst with Janney Montgomery Scott LLC.

An attempt to revive BABs?

Meanwhile, another attempt to revive the popular Build America Bonds program was revealed last week, said Kozlik.

"Democrats from the House Ways and Means Committee proposed permanently instating BABs, which were created under President Obama's Recovery and Reinvestment Act," Kozlik said.

"BABs were a taxable municipal bond alternative many issuers took advantage of in 2009 and 2010 before they expired at the end of 2010. Under the proposal, new BABs issuers would be subsidized at 32%, compared to the old 35% subsidy rate. The recent legislation that included the BABs proposal was included in another jobs-related bill, though chances of passage of any program related to [the American Recovery and Reinvestment Act] is slim due to Republican opposition. We do not expect the proposal will gain much traction."

West Chester school bonds sold

In other news, details were released Monday for the West Chester Area School District of Pennsylvania's $60.33 million sale of series 2012 general obligation bonds.

The offering included $21 million of series 2012A G.O. bonds and $39.33 million of series 2012AA G.O. bonds, said a pricing sheet.

The 2012A bonds are due 2023 to 2032 and have 3% coupons. The 2012AA bonds are due 2014 to 2022 and have 2% to 5% coupons.

The bonds were sold competitively with Janney Montgomery Scott winning the bid. The true interest cost came in at 2.319065%.

"To minimize costs and avoid questions of fairness in the underwriter selection process, general obligation bonds shall be issued through a competitive bidding process," said Robert Partridge, spokesman for the district, quoting the district's policy.

Proceeds will be used to construct, improve, acquire and renovate new and existing school buildings within the district.

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