Municipals little changed as secondary picks up slightly; Florida Board of Education prices

By Sheri Kasprzak

New York, Sept. 5 - Municipal yields were mostly flat on Wednesday with little new-issue action, traders reported. Secondary activity picked up somewhat from the previous session.

Meanwhile, AAA benchmark tax-exempt 10-year bonds closed at 1.73% on Tuesday, 17 basis points below their level two weeks ago. The 30-year index closed at 2.89%, 13 bps lower, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"The light new issue calendar offers little opportunity for market leadership, with the largest issue of the week under $300 million," he wrote.

Chicago expected to be popular

In new-issue activity, the City of Chicago will bring to market $300 million of series 2012 senior-lien wastewater transmission revenue bonds (/A+/AA) through Ramirez & Co. Inc. on Thursday.

The offering is expected to receive decent interest, said one trader reached in the afternoon.

"There's not a lot going on this week, and this should draw a lot of interest," the trader said. "I would expect to see it oversubscribed."

The city plans to use proceeds from the deal to finance capital improvements and extensions to the sewer system.

Florida BOE deal leads primary

Heading up the day's municipal primary action, the Florida Board of Education came to market with $229.93 million of series 2012D public education capital outlay refunding bonds, said a pricing sheet.

The bonds (Aa1//AAA) were sold competitively with Citigroup Global Markets Inc. winning the bid.

Proceeds will be used to refund existing PECO bonds for a debt service savings.

"The real focus has been on the Florida Board of Education deal," a market source said.

"The long bonds were the most popular. Citi bid pretty aggressively on it."

Banks strong buyers of munis

Meanwhile, according to Schankel, banks continue to be strong buyers of municipal bonds.

Banks have purchased $356 billion of increased checking and savings deposits in the first half of 2012, almost twice the level of bond mutual fund inflows in the same period, Schankel said.

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