Municipal yields get hammered again; New York City Water preps $450 million revenue bond sale

By Sheri Kasprzak

New York, Jan. 14 - Municipals yields continued to take a beating on Friday, with long bonds weakening by another 10 basis points, market insiders said.

"Long bonds are weakening the most," said one trader reached during the afternoon.

"Investors are scared, and they're selling. We have a serious liquidity problem now, and that's what's killing us."

While Treasuries are faring better, that's not much help to the muni market, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"The 30-year benchmark AAA muni yield finished at 5.2%, up 12 bps on the day [Thursday], the loftiest level in 18 months," Schankel wrote in a report Friday.

"Ratios are widening with muni yields at 103% of Treasuries in 10 years and 115% in 30."

NYC water leads primary

Meanwhile, visible supply for the coming week is reportedly just $8.5 billion.

The largest sale of the slow week comes from the New York City Municipal Water Finance Authority, which plans to come to market Wednesday with its $450 million sale of series 2011EE water and sewer system second general resolution revenue bonds.

The bonds (Aa2/AA+/AA+) will be sold through senior manager Jefferies & Co. The co-senior managers include Barclays Capital Inc., Morgan Keegan & Co. Inc., M.R. Beal & Co. Inc. and Ramirez & Co. Inc.

Proceeds will be used to finance improvements to the city's water and sewer system as well as to repay commercial paper notes.

The authority provides financing for the upgrade and operation of the city's water and sewer system.

Washington sets sale

Also coming up on Wednesday, the State of Washington is scheduled to price $445.625 million of series 2011 general obligation bonds, said a preliminary official statement.

The sale includes $355.125 million of series 2011B various-purpose G.O. bonds and $90.5 million of series 2011T-2 taxable bonds.

The bonds (Aa1/AA+/AA+) will be sold competitively with Montague De Rose & Associates LLC as the financial adviser.

The 2011B bonds are due 2012 to 2036, and the 2011T-2 bonds are due 2012 to 2020.

Proceeds will be used to finance capital projects.

Sutter sale on the horizon

Looking out a bit, Sutter Health of California plans to bring $900 million of series 2011 revenue bonds through the California Statewide Communities Development Authority and the California Health Facilities Financing Authority. The sale is set for the week of Jan. 24.

The offering includes $325 million of series 2011A bonds from California Statewide and $575 million of series 2011B bonds from California Health Facilities Financing.

Morgan Stanley & Co. Inc. is the senior manager for the bonds (//AA-).

Proceeds will be used to finance the health-care system's ongoing capital plan and refund existing debt.

Sutter Health is based in Sacramento.

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