Munis close slightly softer even as retail investors return; Tennessee to bring two offerings

By Sheri Kasprzak

New York, Oct. 11 - Even though retail investors were back in the market on Tuesday after the Columbus Day holiday, the market retained the soft tone it's had for the past week, said market insiders.

The long end, this time, took the brunt of the weakness, with 30-year yields seen up by more than 4 basis points and 20-year yields up by almost 3 bps. The rest of the yield curve was slightly softer to flat.

"The long end in particular seems to be moving with Treasuries," said one trader reached during the session.

Despite the holiday-shortened week, the muni market will see about $8.5 billion in new issues this week, a robust amount but a little less than the week before.

"A significant new issue calendar for this holiday-shortened week may pose a challenge, but higher absolute yields may draw in more demand," Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC, wrote in a report released Tuesday morning.

Tennessee to bring two deals

Looking to the week's upcoming offerings, the State of Tennessee will be in the market not once but twice. The state is poised to sell $361.055 million of series 2011 tax-exempt general obligation bonds (Aaa/AA+/AAA) through Citigroup Global Markets Inc. and Barclays Capital Inc. in two tranches.

The deal includes $255.48 million of series 2011A G.O. bonds, which are due 2012 to 2031, and $105.575 million of series 2011B G.O. refunding bonds due 2012 to 2025. The bonds are slated to price Thursday.

The state also intends to sell $223.22 million of series 2011C taxable G.O. bonds via J.P. Morgan Securities LLC and Goldman Sachs & Co. during the week. Those bonds are due 2012 to 2031.

Proceeds from both deals will be used to fund capital projects and refund the state's series 2002B, 2003B and 2005A bonds.

Chicago BOE deal ahead

Another major offering set for the week comes from the Chicago Board of Education, which plans to price $398.415 million of series 2011A unlimited tax G.O. bonds through Jefferies & Co. Inc. on Wednesday.

The bonds (Aa3/AA-/A+) are due 2035 to 2041.

Proceeds will be used to fund capital improvements to school facilities.

California public works bonds set

In other big deals during the week, the California State Public Works Board is scheduled to sell $450 million of series 2011 tax-exempt lease revenue bonds on Thursday.

The bonds will be sold on a negotiated basis with Citigroup as the senior manager.

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