Munis close firmer ahead of $3 billion new supply; Fairfax County, Va., preps $317.62 million

By Sheri Kasprzak

New York, Jan. 7 - Municipal yields were firmer on Monday after several sessions of losses, market sources said.

Traders reached in the afternoon reported that yields were firmer in spots after struggling last week with Treasuries selling off. Supply has been an issue for municipals as well, with the market offering a scant $2 billion of offerings to investors in the just completed holiday-shortened week. This week will provide a slightly more robust $3 billion, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

"It's not just primary," one trader said.

"We are seeing some strong trades today, and it's busier than it has been in a few sessions. A few significant triple-A issues were trading much stronger today. There are a lot of factors pushing us. You've also got Treasuries improving somewhat. For the first time in more than a week, things are looking up, and everything just kind of came together for munis today."

Yields were reportedly firmer by as much as 3 basis points to 5 bps, especially around 10 years, said a trader.

Week to bring $3 billion

In new issues, about $3 billion of supply is expected to hit the market this week, said Kozlik, after a particularly sluggish first week of the New Year.

"We expect municipal bond primary market issuance to remain muted in the first full week of January, despite a history of a return to a more normal level of issuance during this time period," Kozlik said Monday.

"The weekly forward calendar is showing only $3 billion of long-term sales that are expected to price. This is a rather surprising development after two straight weeks of holiday-shortened volume for the week of Dec. 21 and 28."

Fairfax leads issuance

Heading up that light activity, Kozlik said, is a $317,615,000 offering of series 2013 public improvement bonds from Fairfax County, Va. That deal is scheduled to hit the market on Wednesday.

The offering will be conducted in two tranches: $216.16 million of series 2013A bonds, which are due 2013 to 2032, and $101,455,000 of series 2013B refunding bonds, which are due 2014 to 2024.

Proceeds from the bonds (Aaa/AAA/AAA), which will be sold competitively, will be used to finance school, transportation, public safety, parks and recreation and other improvements as well as to refund the county's series 2004A-B, 2005A, 2007A and 2008A public improvement bonds.

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