Muni yields firm 2 to 4 bps amid very light supply; only $1.5 billion of new issues expected

By Sheri Kasprzak

New York, April 18 - Municipals continued to rally on Monday, keeping alive a five-day winning streak as low supply continued to buoy the market, insiders said.

With Passover and Good Friday shortening the week, issuers are hesitant to come to market with new issues, said one trader.

"Very, very little is pricing this week," he said.

"In a way, that helps because there's zero supply pressure right now. But there is demand, and when things do pick up, I think everyone's wondering what's going to happen to yields. There's a real fear that yields will rise again once supply picks up, and that could happen soon."

The biggest improvement in yields on Monday was seen in the intermediate maturities. Bonds between 10 and 20 years were seen better by about 4 basis points. Shorter bonds and longer bonds were improved by 2 to 3 bps, said the trader.

Just $1.5 billion ahead

For the week, municipal issuance will be substantially lower than usual - even compared to the recent scant volume.

Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC, reported Monday that negotiated new issuance will be about $700 million. A few smaller competitive offerings will be conducted during the week, making the amount closer to $1.5 billion.

"Primary market negotiated new issuance is expected to reach only about $700 million this week as a lack of supply continues to define the municipal market - all the more so in a holiday week," Kozlik said.

Mayo deal planned

Heading up the light negotiated calendar, the City of Rochester in Minnesota is slated to bring $290 million of series 2011 health-care facilities revenue bonds on behalf of the Mayo Clinic.

Merrill Lynch and Wells Fargo Securities LLC will bring the bonds (Aa2/AA/) to market during the week.

Proceeds will be used to refund the clinic's series 1992 and 2001 bonds.

Sugar Land to price bonds

Leading Tuesday's pricing action, the City of Sugar Land, Texas, is gearing up to bring $98.55 million of series 2011 combination tax and revenue certificates of obligation competitively.

The certificates are due 2012 to 2041.

Proceeds will be used to construct the city's surface water treatment plant, to make upgrades to the surface water conversion and water supply and to improve surface water transmission lines.

Clarksville too

Another competitive sale on Tuesday will come from the City of Clarksville, Tenn., which plans to sell $68.58 million of water, sewer and gas revenue refunding bonds.

The bonds (Aa3//AA-) are due 2012 to 2025, and proceeds from the offering will be used to refund existing debt and to terminate a swap agreement connected to the refunded bonds.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.