Municipals flat as trading stays light; about $11 billion in supply on tap for week ahead

By Sheri Kasprzak

New York, Dec. 10 - Municipal yields were largely unchanged on Monday ahead of about $11 billion in new offerings, market sources said. Secondary activity was light, and retail order periods for a few offerings garnered yawns.

"Everything is quiet, which is interesting since this is really the last major week for issuance for the year," said one trader.

Another market source noted that retail interest in one of the week's largest deals - an $862.74 million offering from the City of New York - failed to pique the interest of retail investors. He noted that about $140 million in retail orders for the series 2013 general obligation bonds (Aa2/AA/AA) were received Monday.

"This seems to be pulling down the tone of the market today," he noted.

New York deal ahead

The New York City offering will be conducted in two tranches. The deal includes $503.15 million of fiscal 2013D bonds and $359.59 million of fiscal 2013E bonds.

The 2013D bonds are due 2014 to 2028, and the 2013E bonds are due 2013 to 2033.

The bonds will be sold through senior manager Raymond James/Morgan Keegan.

The city intends to use the proceeds to refund outstanding G.O.s for savings in the current fiscal year and in fiscal 2014.

Last week for big issuance

Meanwhile, the week ahead will provide about $11 billion in new issues, the last week investors can expect any significant primary issuance, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

"The holiday will slow participation and break up the week of the 17th and the week of the 24th, although there will likely be a small number of issuances looking for buyers during that time," Kozlik said Monday.

HFA bonds eyed

Elsewhere in the market, municipal and crossover investors shouldn't ignore single family housing bonds due to an uneven or slow housing market recovery, Kozlik said.

"The worst of the credit fallout to [single family] housing finance agency credit quality has occurred and is over," Kozlik said.

"Investors are or should be transitioning back to concentrating on structure and redemption considerations versus credit. State HFA credit quality is and will remain very strong. We are also very surprised that all investors have not recognized the significant relative value opportunity available with state HFA single family housing bonds."

Calendar builds

On Tuesday alone, two housing offerings are on the calendar.

The Connecticut Housing Finance Authority is slated to price $79.63 million of housing mortgage finance bonds (Aaa/AAA/AAA) through Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Bank of America Merrill Lynch.

The offering will be conducted in five tranches, and proceeds will finance mortgage loans.

The Virginia Housing Development Authority plans to price $560 million of mortgage bonds in four tranches on a competitive basis.

The bonds (Aaa/VMIG1/AAA/A-1+/) will be used to finance mortgage loans and refund previously issued bonds.

"A credit negative for state HFA whole loan programs is that mortgage delinquencies and foreclosures continue to set record highs, at 7.01% (June 30, 2012), up from 6.72% (June 30, 2011), according to data released by Moody's in Dec. 4, 2012," Kozlik said.

"However, the record level of mortgage delinquencies and foreclosures does not have us overly concerned. We have and continue to believe that state HFA programs have strong enough balance sheets/financial positions in order to counter this record negative activity."

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