Munis firm as new offerings come to market; New York City Municipal Water brings $400 million

By Sheri Kasprzak

New York, Jan. 24 - Municipal yields were slightly firmer on Tuesday after a three-session losing streak, thanks in part to a trickle of new offerings, especially a major deal from the New York City Municipal Water Finance Authority, said traders reached during the day.

Shorter yields were little changed, and long bonds were seen firmer by 1 to 2 basis points, said one trader.

This follows three sessions of rising yields, sparked in part by weaker Treasuries. This shouldn't be considered a trend, said Matt Fabian, managing director with Municipal Market Advisors.

"A correction in yield has begun but may be short-lived, depending on recovery in demand for UST," Fabian wrote in a report.

"Between Thursday and Friday, municipal yields rose up to 15 bps, led by intermediate and longer maturities, bear-steepening the curve. For the most part, this was in tandem with Treasuries - which weakened by up to 20 bps at the 30-year maturity.

"But participants cannot discount the aversion buyers have had to record-low muni yields, in particular for an asset class with the kind of tax, credit, regulatory and liquidity risks threatening performance this year. This year, bid strength appears to have come from both dealers, banks, forced re-investors and new entrants chasing last year's exceptional returns."

New York water bonds price

One of the largest offerings of the week priced Tuesday following a one-day retail order period. The New York City Municipal Water Finance Authority sold $400 million of series 2012 water and sewer system second general resolution revenue bonds, said a statement from the authority.

The deal included $350 million of series 2012CC bonds and $50 million of series 2012DD bonds.

The 2012CC bonds are due June 15, 2045, have a 5% coupon and priced to yield 3.94%.

The 2012DD bonds are due 2018 and 2027. The 2018 bonds have a split maturity with a 3% coupon and a 4% coupon to yield 1.22%. The 2027 bonds have a 5% coupon. The full pricing details of the 2027 maturity were unavailable Tuesday.

"During the one-day retail order period, NYW received $106 million of retail orders," Raymond Orlando, the authority's spokesman, said in a statement released Tuesday.

Coupons on the authority's most recent sale, in November, ranged from 4.125% to 5.25%.

The new bonds (Aa2/AA+/AA+) were sold through senior manager Ramirez & Co. Inc.

Proceeds will be used to make a deposit to a construction fund and to refund existing commercial paper notes.

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