Munis continue to bleed; more deals get postponed; Illinois $1.3 billion deal will go ahead

By Sheri Kasprzak

New York, June 25 - Municipal yields rose again on Tuesday, with 10-year yields continuing to take a beating, market sources said. Ten-year bonds were up 15 basis points after climbing 15 bps also on Monday.

Shorter maturities were also weaker by more than 10 bps, and 30-year yields were seen weaker by more than 10 bps.

After Monday's difficult session, 30-year bonds rose above 4% for the first time since 2011, said a trader.

The market weakness is causing some issuers to clear their offerings off the table for the week, but the week's largest offering, a $1.3 billion issue of general obligation bonds from the State of Illinois, will price, according to market insiders.

Worst month since 2008

Investment-grade municipals have seen a total return of negative 4.97% so far in June, the worse month since September 2008 when the S&P National AMT-Free Municipal Bond index was down 5.13%, said J.R. Rieger, vice president of fixed income indexes with S&P Dow Jones Indices.

"The yield [to worst] on bonds in the index has risen by 95 bps since the end of May," Rieger said.

High-yield munis have performed even worse, as tracked by the S&P Municipal Bond High Yield index, Rieger said. High-yield munis have seen a return of negative 7.08% for June thus far, the worst month since December 2008 when it recorded a negative 9.12% return.

"Yields of bonds in the index have risen by 88 bps for the month of June so far," said Rieger.

Looking to specific issuers, Puerto Rico is the worst-performing issuer. The S&P Municipal Bond Puerto Rico index is down 7.63% for June so far. The S&P Municipal Bond Illinois index is down 4.66%, and the California index is down 5.35%.

Salt Lake County TRANs price

Amid Tuesday's primary action, Salt Lake County, Utah, sold $67 million of series 2013 tax and revenue anticipation notes, said a pricing sheet.

The notes (MIG 1) were sold competitively with BofA Merrill Lynch winning the bid. The true interest cost came in at 0.160816%, said a source close to the offering. There were seven bidders for the offering, said the source.

The notes are due Dec. 27, 2013, have a 1% coupon and priced at 100.389.

Proceeds will be used to finance cash flow needs for the county.

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