Munis close little changed amid light trading; Dasny prepares largest bond offering of week

By Sheri Kasprzak

New York, Sept. 10 - Municipal yields were little changed on Monday as the market expects another subdued new-issue calendar, market sources reported.

"Treasuries are pretty flat today as well," said a trader reached during the session.

"Secondary activity is still pretty quiet this afternoon. We're seeing some block trades, but it's been light."

Primary action this week will include $3.7 billion of new offerings, said Alan Schankel, managing director with Janney Montgomery Scott LLC. This marks the third straight week of volume below $4 billion, Schankel noted.

"Recent data on fund flows indicate continued demand for munis from retail investors, while another demand factor is ebbing as the total flows from maturing and advance refunded bonds hits the lowest monthly level of the year at $12.5 billion - about half that of the average summer month," Schankel wrote Monday.

Demand remains strong

Inflows to municipal mutual funds remain strong, said Schankel, and the recently inadequate supply might not be able to satisfy investor appetite for tax-free bonds.

After September, he said, redemptions will again increase, but the $9 billion difference between redemption flows in August compared to September is far more than the amount of fund inflows in any month so far this year.

"A significant late month increase in new issuance could add market pressure for a few weeks, but longer term, into the fourth quarter, we expect the supply demand balance to remain favorable for investors," Schankel said.

Dasny deal ahead

Moving to new issues for the week, the Dormitory Authority of the State of New York hit the retail market Monday with the largest sale of the week, $238 million of series 2012A lease revenue bonds for the state university system. Institutional pricing is expected Tuesday.

The authority intends to sell its bonds (Aa2/AA-/) through senior managers Ramirez & Co. Inc. and Jefferies & Co.

Chatter says the offering will bring in quite a bit of interest, especially given a strong retail order period.

"I think retail is interested," one market insider said of the offering on Monday.

"They've had a favorable ROP, which could be an indicator of improved retail interest in the overall market, or it could just be low supply."

Proceeds from the Dasny deal will be used to finance the construction of dormitory facilities at various state universities and to refund existing debt.

Kane district brings G.O.s

In Monday's primary action, the Forest Preserve District of Kane County of Illinois brought to market $72,315,000 of series 2012 general obligation refunding bonds, said a pricing sheet.

The bonds were sold competitively. Bank of America Merrill Lynch won the bid with a 0.650831% true interest cost.

The bonds are due 2013 to 2017 with 4% coupons.

Proceeds will be used to refund the district's series 2004 G.O. refunding bonds and its series 2005 G.O. bonds.

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